The debt-to-equity ratio can be computed with the following formula, using figures from your balance sheet:
The ratio of debt-to-owner's equity or net worth indicates the degree of financial leverage that you're using to enhance your return. A rising debt-to-equity ratio may signal that further increases in debt caused by purchases of inventory or fixed assets should be restrained.
Improving this ratio involves either paying off debt or increasing the amount
of earnings retained in the business until after the balance sheet date. For
instance, can expenses be deferred beyond the balance sheet date to increase
your retained earnings? What about bonuses? Delaying any planned bonus expense
serves to increase your retained earnings. As another example, you might think
about repaying revolving debt (such as a line of credit) before the balance
sheet date and borrowing again after the balance sheet date.