The debt-to-equity ratio is a key financial metric used to assess a company's financial leverage and indicates the balance between the funds provided by creditors and shareholders to finance the company’s assets. It is calculated by dividing the company's total liabilities by its total equity, often expressed as a number or percentage.

A high ratio might suggest that the company is relatively highly leveraged, relying more on debt for its financing. Conversely, a low ratio indicates that the company relies more on equity, which may reduce financial risks but also limit growth due to the higher cost of equity.

For example, a company with $2 million in debt and $1 million in equity would have a debt-to-equity ratio of 2:1 or 200%. This indicates that the company has $2 of debt for every $1 of equity.