(D/E) shows a company's financial leverage by comparing total debt to shareholders' equity, revealing reliance on borrowed funds versus owned capital.
The Debt to Equity Ratio (D/E) is a financial metric used to assess a company's financial leverage, comparing its total debt to its shareholders' equity. In a rights issue, the D/E ratio helps investors understand how the company is financing its operations and whether it is relying more on debt or equity.
For example, if a company with a high D/E ratio issues rights at a discounted price, it may aim to reduce its debt burden by raising equity. A lower D/E ratio post-rights issue generally reflects a stronger financial position and reduced risk.
Answered on
