Dr. Paul Borosky, DBA, MBA
Business Consultant & Author
Guide 31 of 34 · Financial Ratios
How to Calculate Debt-to-Equity Ratio
Borrowed money vs. owners’ money. Who is really funding the company?
Debt is like chocolate cake: some is good, too much is not. The debt-to-equity ratio tells you how much a company leans on lenders instead of owners. Apple’s reads 134%, Microsoft’s 12%. That gap is real, but it is not what it first looks like.
Last Updated: 10/27/2026 · Written by Dr. Paul Borosky, DBA, MBA
The Short Answer
What Is the Debt-to-Equity Ratio?
Textbook Definition
The debt-to-equity ratio divides a company’s total debt, short-term plus long-term, by total shareholders’ equity. It measures financial leverage: how much of the company is financed by creditors relative to owners.
In Plain English
For every dollar owners have in the company, how many dollars are borrowed? A ratio near 100% means equal parts debt and equity. Higher means more risk from lenders. Lower means more cushion.
Debt-to-Equity Ratio
(Short-Term Debt + Long-Term Debt) ÷ Total Equity
Apple, fiscal 2025: 133.8%
Both debt lines come from the balance sheet. Short-term debt is due within a year. Long-term debt is due later. Add them together for this ratio.
One Real Company
Apple’s Debt Ratios, 2021 to 2025
Debt fell every single year, from $124.7 billion to $98.7 billion. Equity bounced around because of buybacks. Watch both rows, not just the ratio.
| Line | 2025 | 2024 | 2023 | 2022 | 2021 |
|---|---|---|---|---|---|
| Total debt | 98,657 | 106,629 | 111,088 | 120,069 | 124,719 |
| Total equity | 73,733 | 56,950 | 62,146 | 50,672 | 63,090 |
| Total assets | 359,241 | 364,980 | 352,583 | 352,755 | 351,002 |
| Debt-to-equity | 133.8% | 187.2% | 178.8% | 237.0% | 197.7% |
| Debt ratio (debt ÷ assets) | 27.5% | 29.2% | 31.5% | 34.0% | 35.5% |
| Times interest earned | N/D | N/D | 29.1 | 40.7 | 41.2 |
Source: Apple Form 10-K filings, fiscal 2021 to 2025, as analyzed in the book. $ millions. N/D = interest expense not disclosed separately after fiscal 2023.
The Method
How to Read Debt Ratios in 5 Steps
Add up all the debt.
Short-term debt plus long-term debt. Do not use total liabilities, which also include supplier bills and other items.
Divide by equity, then by assets.
Debt-to-equity shows leverage against the owners’ stake. The debt ratio shows how much of everything owned was bought with borrowed money.
Check which part moved.
The ratio can drop because debt fell or because equity rose. In 2025 both helped Apple: debt fell and equity rose.
Check interest coverage.
Times interest earned shows whether profits can cover the interest bill. Apple covered it 29 to 41 times.
Compare inside the industry.
Utilities and banks carry far more debt than software companies. Judge leverage against direct rivals.
Why the Book Gives a B+, Not a D
On its face, 134% is high. But Apple’s equity is held down by years of buybacks, so the ratio looks riskier than the company is. The debt ratio, which uses assets instead of equity, fell from 35.5% to 27.5%. That is the cleaner read on risk, and it earns an A.
Compare It
Apple vs. Microsoft: Is It the Debt or the Equity?
| Latest fiscal year | Apple | Microsoft |
|---|---|---|
| Debt-to-equity | 134% | 12% |
| Debt ratio | about 27% | high single digits |
| Long-term debt | $78B | $40B |
| Total equity | $74B | $343B |
Microsoft’s fiscal year ends in June, Apple’s in September.
Apple does carry more debt, about twice Microsoft’s long-term debt. But its equity is less than a quarter of Microsoft’s. Most of the gap comes from the bottom of the fraction, the same effect that inflates Apple’s return on equity.
The Banker’s Ratio
Times Interest Earned: Can Profit Cover the Interest Bill?
Lenders care less about how much you owe and more about whether you can pay the interest. Times interest earned divides operating profit (EBIT) by interest expense. Any number above a handful is considered safe.
Apple covered its interest bill about 41 times in 2021, 41 times in 2022, and 29 times in 2023. Then Apple stopped reporting interest expense as its own line and folded it into other income and expense. A clean 2024 and 2025 figure cannot be calculated from the statements.
That is a lesson in itself. Companies change what they disclose. When a number disappears, note the gap and work with what you have. Everything Apple did report says interest is a trivial concern for this company.
Beginner Traps
What Do Beginners Get Wrong About Debt-to-Equity?
- Using total liabilities instead of interest-bearing debt.
- Assuming zero debt is ideal. It can mean missed opportunity.
- Ignoring how buybacks shrink equity and inflate the ratio.
- Comparing leverage across unrelated industries.
- Skipping interest coverage, the ratio bankers care about most.
- Missing a disclosure change, like Apple folding interest into other income.
How the Book Grades Apple’s Debt
From the Book
The Question to Ask First
Debt Ratios · Debt to Equity Ratio
Debt or Equity?
When you see a debt-to-equity ratio this different between two peers, always check whether it is the debt that differs, the equity, or both.
Debt ratio, debt-to-equity, and times interest earned, worked on Apple and graded. It is all in the book.
Get the Book on Amazon →If You Sign the Loan Papers
For a small business, debt is personal: you usually guarantee it. Before you borrow, read good debt vs. bad debt. Need a plan a lender will fund? Dr. Paul writes them through business plan writing services.
Beyond the Book
Need Help With Your Own Numbers?
Do it yourself, hand it off, or work through it together.
Business Plan Templates
The statements, prebuilt. A Word plan plus an Excel model for your industry.
See the Templates →Business Plan Writing
Hand it off. Dr. Paul writes the plan and the numbers that back it up.
See Plan Writing →Business Consulting
Straight answers on the numbers that run your business, from Dr. Paul.
See Consulting Options →FAQ
Debt-to-Equity Ratio Questions
What is a good debt-to-equity ratio?
How do you calculate debt-to-equity?
Is debt-to-equity the same as the debt ratio?
Why is Apple’s debt-to-equity ratio so high?
Keep Going
Related Guides
Every formula sits in the financial ratios cheat sheet.
Written by Dr. Paul Borosky, DBA, MBA, business consultant, author, and adjunct finance instructor with an MBA focused in finance.
This page is for general educational purposes only. It is not investment, financial, tax, accounting, or legal advice, and nothing here is a recommendation to buy or sell any security. Apple and Microsoft figures come from their public filings as analyzed in the book. Apple and Microsoft are trademarks of their respective owners, and this page is not affiliated with or endorsed by either company.