The standard Debt-Equity ratio is

The Debt-Equity ratio measures the relationship between borrowed funds (debt) and owners' funds (equity) in a business.

Formula:

Debt-Equity Ratio = $\frac{\text{Total Debt}}{\text{Shareholders' Equity}}$

The standard or ideal Debt-Equity ratio is 2:1.

This means for every ₹1 of equity, a company can have up to ₹2 of debt. In other words:

• If Equity = ₹1,00,000
• Then acceptable Debt = ₹2,00,000
• Ratio = 2:1

This ratio is considered a safe and balanced capital structure as it indicates that the company has adequate equity cushion to cover its debt obligations. A ratio of 2:1 suggests the business is not over-leveraged and has sufficient ownership funds relative to borrowed funds.

While this standard may vary across industries, 2:1 is the generally accepted benchmark in financial analysis for evaluating a company's financial health and leverage position.