Growing a successful business always requires careful management of your cash. The faster your business grows the more cash you will need. Eventually you need to get external finance and a decision needs to be made whether to raise debt or increase equity. Your debt to equity ratio is an indication of how much skin you have in the game. If you are having difficulty gaining external borrowings this is likely to be one of the problems. The calculation of Total Liabilities divided by Shareholders Funds (Equity) is an indication risk to external stakeholders, particularly banks and financiers. It is how they calculate how safe their money is.
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