Debt-to-Equity Ratio
Learn the debt-to-equity formula, how Malaysian investors read it, and a worked Company A example in RM. Education only, not investment advice.
What is Debt-to-Equity Ratio?
Debt-to-equity compares a company’s interest-bearing borrowings with its shareholders’ equity. The formula is total borrowings divided by total shareholders’ equity, times 100%. A higher ratio means more of the business is funded by debt. Some analysts use total liabilities instead, so check which version a source uses.
How it is calculated
Debt-to-equity shows how far a company relies on borrowed money compared with the capital its shareholders have put in. Usually only interest-bearing debt is counted: short-term and long-term bank loans, bonds and similar borrowings.
Debt-to-equity (%) = Total borrowings (short-term + long-term) ÷ Total shareholders’ equity × 100%
Both inputs come from the balance sheet at the same date.
How Malaysian investors use it
Bursa Malaysia companies report borrowings and equity every quarter, so the ratio can be tracked over time. Compare it with the company’s own history and with peers in the same sector, because asset-heavy industries often carry more debt than service businesses. Read it alongside interest costs and cash flow.
Worked example: Company A
Hypothetical figures in RM million:
| Item | RM million |
|---|---|
| Short-term borrowings | 45 |
| Long-term borrowings | 75 |
| Total shareholders’ equity | 300 |
Common mistakes
- Comparing a total-liabilities figure with a borrowings-only figure from another source.
- Judging a single quarter without looking at the trend.
- Forgetting that dividends, buybacks or losses change equity and therefore the ratio.
Related terms
- Balance sheet – where borrowings and equity are reported.
- Current ratio – a short-term liquidity check to read alongside it.
- Return on equity – shows how borrowing can affect shareholder returns.
Where Finworld shows it
Finworld’s financial statements view includes ratios across annual, quarterly and trailing-12-month periods, with comparison against the sector.
Frequently asked questions
Is a high debt-to-equity ratio always a problem?
Not always. Debt can fund growth, but it adds interest costs and repayment risk, so read the ratio with cash flow and sector norms.
Should I use borrowings or total liabilities?
Either works if you state which one you used. Use the same definition when comparing two companies.
Where do I find the inputs for a Bursa company?
They appear in the balance sheet of the quarterly or annual report, which is published through Bursa Malaysia announcements.
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