Long-Term Debt/Capitalization

Long-Term Debt/Capitalization

A ratio showing the financial leverage of a firm, calculated by dividing long-term debt by the amount of capital available:

Notes:

A variation of the traditional debt-to-equity ratio, this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies who finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.

See also: Capitalization, Common Stock, Debt, Debt/Equity Ratio, Interest-Sensitive Stock, Leverage, Long-Term Debt, Preferred Stock, Shareholders' Equity

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Long-term debt/capitalization

Indicator of financial leverage. Shows long-term debt as a proportion of the capital available. Determined by dividing long-term debt by the sum of long-term debt, preferred stock and common stockholder's equity.