What financial metric is calculated by dividing total liabilities by total equity?

The financial metric calculated by dividing total liabilities by total equity is known as the debt-to-equity ratio. This ratio is a critical indicator of a company's financial leverage and stability. It essentially measures the proportion of a company's funding that comes from debt versus equity.

When this ratio is high, it indicates that a company is primarily financed through debt, which can imply higher risk, especially in times of financial instability. Conversely, a lower ratio suggests that a company is less dependent on debt for its funding, which may signal greater financial health and easier access to additional capital.

This ratio is an essential tool for investors and analysts as it provides insights into a company’s capital structure and the balance between debt and equity financing. It helps assess the risk associated with the company's financial strategy and its ability to meet financial obligations.