Debt-to-Equity Ratio Debt-to-equity ratio is another simple ratio Debt to Equity Ratio is used to: – Calculate Net Worth – Give you a picture of your long-term financial health

Debt-to-Equity Ratio How to Calculate Debt-To-Equity – Add up total liabilities: $ amounts for mortgage payoff auto loan payoff student loan payoff + any other long-term liabilities. – Add up total assets: Value of your home Value of Automobiles Cash on Hand (Bank Accounts, etc) – Divide Total Liabilities by Total Assets

Debt-to-Equity Ratio How to Interperet Debt-To-Equity Ratios Any DTE ratio above 80% is considered risky Young couples and working poor are most likely to have high DTE ratios Older homeowners should hope to have DTE down below 50%

Debt-to-Equity Ratio For Example: Peter: – Has a home worth $440,000. His mortgage balance is $315,000. – Has two cars worth $12,000 and $6,000. One car is paid off and the other has a loan amount of $10,000 left. – Has student loan debt of $15,000 Find Peter’s DTE ratio.