Finance Formulas / July 19, 2018 / Avalynn Orr
For example, an investor starts her own business with $100,000 and earns $120,000 in profits during the first year. Her accounting profit is $20,000. But that same year, she could have earned an income of $45,000 working as an employee for ABC Corporation. The investor’s economic profit for the year is actually a loss of $25,000.
The DebtEquity (DE) ratio can be applied to personal financial statements as well, in which case it is also known as the Personal DebtEquity Ratio. Here, "equity" refers not to the value of stakeholders’ shares but rather to the difference between the total value of an individual’s assets and the total value of his or her debt or liabilities.
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