Last updated: October 2026
The debt-to-equity (D/E) ratio measures a company’s total liabilities relative to shareholders’ equity, showing how much of its operations are funded by borrowed money versus funds the company’s own owners have put in.
Not financial advice. All figures for educational reference only. Data as at October 2026.
Key Takeaways
- D/E ratio is calculated as total liabilities divided by total shareholders’ equity, and a higher ratio generally signals a company relies more heavily on debt financing relative to its own capital base.
- ‘Normal’ D/E ratios differ sharply by industry — capital-intensive sectors like REITs, banks and utilities typically run structurally higher D/E than asset-light technology or services companies, so cross-sector comparisons can mislead.
- For S-REITs specifically, Singapore’s Monetary Authority (MAS) imposes an aggregate leverage limit (capping gearing at 50% of total assets) that functions similarly to a regulatory ceiling on D/E-style leverage.
- A low D/E ratio is not automatically ‘safer’ — a company that is excessively conservative with debt may also be under-utilising cheap financing to grow earnings, which can show up as a lower return on equity.
- Investors should pair D/E ratio with interest coverage ratio, since a company can carry a moderate D/E but still struggle if its earnings are too thin to comfortably service the interest on that debt.
What Is the Debt-to-Equity Ratio?
The debt-to-equity ratio is one of the most commonly cited measures of a company’s financial leverage — how much of its asset base is funded by creditors (debt) versus owners (equity). A D/E ratio of 1.0 means a company has exactly as much debt as equity; a ratio of 2.0 means it has twice as much debt as equity.
Leverage is a double-edged sword. Moderate, well-managed debt can boost a company’s return on equity by funding growth more cheaply than issuing new shares, since debt is often tax-deductible and does not dilute existing shareholders. But excessive debt increases financial risk — fixed interest obligations must be paid regardless of how business performs, and in a downturn, highly leveraged companies face a higher risk of covenant breaches, credit downgrades, or in severe cases, insolvency.
For Singapore investors, industry context is essential when interpreting D/E. S-REITs and banks structurally carry much higher leverage than typical operating companies, because their business models are built around borrowing to acquire income-producing assets or extend credit — so a D/E ratio that looks alarming for a manufacturing company might be entirely normal for a REIT.
How Does D/E Ratio Work in Singapore?
D/E ratio is calculated using figures from a company’s balance sheet: Total Liabilities ÷ Total Shareholders’ Equity. Some analysts use a narrower version focused only on interest-bearing debt (loans and bonds) rather than all liabilities (which would also include trade payables and other non-debt obligations) — it is worth checking which version a particular data source is using.
| Sector | Typical D/E Range (Illustrative) | Why |
|---|---|---|
| S-REITs | 0.6 – 1.0 (gearing capped near 50% of assets by MAS) | Business model relies on borrowing to acquire property |
| Banks | Structurally high (different leverage framework applies) | Deposits and borrowings fund lending activities |
| Industrial / Manufacturing | 0.3 – 0.8 | Moderate capital intensity, mix of debt and equity funding |
| Technology / Services | 0.1 – 0.4 | Asset-light, less reliant on borrowed capital |
Because D/E draws from a balance sheet snapshot at a single point in time, investors often track the trend over several quarters or years, rather than relying on one isolated figure, to see whether a company’s leverage is rising, falling, or staying stable relative to its own history.
Debt-to-Equity Ratio Example
Consider a hypothetical SGX-listed industrial company with total liabilities of S$450 million and total shareholders’ equity of S$600 million. Its D/E ratio would be 0.75 (S$450m ÷ S$600m) — meaning it has 75 cents of debt for every dollar of shareholders’ equity.
An investor comparing this to a Singapore bank, which might report a much higher leverage figure under its own regulatory framework, should not conclude the bank is “riskier” purely from that number — banks operate under an entirely different capital adequacy framework (such as Basel III requirements enforced by MAS) designed specifically for deposit-taking institutions.
If the same industrial company’s D/E had instead been 2.5 — meaning S$2.50 of debt for every dollar of equity — and its sector peers typically ran closer to 0.5–0.8, that would be a meaningful red flag worth investigating further, potentially alongside its interest coverage ratio to assess whether its earnings comfortably cover the associated interest expense.
Advantages of Using D/E Ratio
- Quick leverage snapshot. D/E ratio gives investors a fast read on how reliant a company is on borrowed capital relative to its own equity base.
- Useful for peer comparison. Comparing D/E across companies in the same sector highlights which ones are running comparatively conservative or aggressive balance sheets.
- Trend analysis reveals direction. Tracking D/E over several periods shows whether a company is deleveraging (reducing debt reliance) or increasing leverage, which can signal changing risk appetite or growth strategy.
- Complements other fundamental metrics. Paired with interest coverage ratio and return on equity, D/E helps build a fuller picture of both a company’s risk and its efficiency in using debt.
- Readily available. D/E can be calculated directly from any company’s published balance sheet, without needing specialised data access.
Risks and Limitations
- Not comparable across industries. A D/E ratio that looks high for one sector (e.g. technology) may be entirely normal for another (e.g. REITs or utilities), so cross-sector comparisons can be misleading.
- Different data sources may define it differently. Some providers use total liabilities, others use only interest-bearing debt, producing different D/E figures for the same company.
- Snapshot in time. A balance sheet reflects a single reporting date, which may not capture significant debt raised or repaid shortly after that date.
- Does not reflect debt affordability. A moderate D/E ratio can still be risky if a company’s earnings are too thin to comfortably cover interest payments, which is why interest coverage ratio is typically checked alongside it.
- Equity figures can be distorted. Accumulated losses, share buybacks, or large one-off write-downs can shrink shareholders’ equity, artificially inflating the D/E ratio even if debt levels themselves have not changed.
D/E Ratio vs Related Metrics
| Metric | What It Measures | Best Paired With |
|---|---|---|
| Debt-to-Equity Ratio | Leverage — debt relative to shareholders’ equity | Interest coverage ratio, for debt affordability context |
| Interest Coverage Ratio | Ability to pay interest from operating earnings | Debt-to-equity ratio, for overall leverage risk |
| Current Ratio | Short-term liquidity — ability to cover near-term obligations | Debt-to-equity ratio, for a fuller solvency picture |
| Gearing Ratio (REIT) | REIT-specific leverage, as a % of total assets | Aggregate leverage limit set by MAS for S-REITs |
Source: Standard financial analysis methodology; MAS REIT regulatory framework, 2026.
The Bottom Line
For Singapore investors, the debt-to-equity ratio is a useful starting point for gauging how much of a company’s capital structure relies on borrowed money, but it only becomes meaningful when compared against sector peers and tracked over time. A high D/E is not automatically dangerous, nor is a low D/E automatically safe — context, trend, and the company’s ability to actually service its debt matter far more than the raw number alone.
Frequently Asked Questions
What is a good debt-to-equity ratio?
There is no single ‘good’ D/E ratio — it depends heavily on the industry. Capital-intensive sectors like REITs and banks structurally run higher D/E than asset-light sectors like technology, so comparisons should be made within the same industry.
How is debt-to-equity ratio calculated?
D/E ratio is calculated by dividing a company’s total liabilities by its total shareholders’ equity, both figures taken from the company’s balance sheet.
Why do S-REITs have higher debt-to-equity ratios?
S-REITs are structurally built around borrowing to acquire income-producing property, and operate under MAS’s aggregate leverage limit capping gearing at 50% of total assets, which is a different but related leverage framework.
Is a high D/E ratio always risky?
Not necessarily — it depends on whether the company’s earnings comfortably cover the interest on that debt (measured by interest coverage ratio) and whether the leverage level is normal for its industry.
What is the difference between D/E ratio and gearing ratio?
D/E ratio compares total liabilities to shareholders’ equity, while gearing ratio (commonly used for REITs) typically expresses debt as a percentage of total assets — both measure leverage but from slightly different angles.
Can debt-to-equity ratio be negative?
Yes, if a company has negative shareholders’ equity (accumulated losses exceeding paid-in capital), the resulting D/E ratio becomes negative or mathematically distorted, which usually signals significant financial distress.