debt-to-equity ratio has fallen from eight when the deal closed to around two

hailept

Senior Member
Vietnamese
Can somebody explain the phrase in bold for me, please?

The transaction cemented Verizon’s status as a leader in the wireless age and prompted a consolidation in the telecom industry. Despite early concerns about taking on too much debt, Verizon’s debt-to-equity ratio has fallen from eight when the deal closed to around two today. Meanwhile, the company’s stock has risen 34% since the transaction was announced.

Source: 7 Mergers and Acquisitions That Defined a Decade in Dealmaking and Reshaped the Economy
 
  • morior_invictus

    Senior Member
    Slovak
    If something falls from X to Y, it becomes less in number/intensity etc. (it falls from a higher level X to a lower level Y).

    Debt-to-equity = debt / equity.

    Example:
    Year 1:
    Total debt = $110B
    Total equity = $13.75B
    Debt-to-equity = 110 / 13.75 = 8

    Year 2
    (scenario 1: change in debt only):
    Total debt = $27.5B
    Total equity = $13.75B
    Debt-to-equity = 27.5 / 13.75 = 2

    Year 2
    (scenario 2: change in equity only):
    Total debt = $110B
    Total equity = $55B
    Debt-to-equity = 110 / 55 = 2

    Year 2
    (scenario 3: change in both debt and equity):
    Total debt = $88B
    Total equity = $44B
    Debt-to-equity = 88 / 44 = 2
     
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