What Does Long-Term Debt to Capitalization Ratio Mean?
A ratio that shows the financial leverage of a firm; it is calculated by dividing long-term debt by the amount of capital available:
Investopedia explains Long-Term Debt to Capitalization Ratio A variation of the traditional debt-to-equity ratio, this ratio computes the proportion of a company's long-term debt relative to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it with others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital through debt are considered riskier than those with lower leverage ratios.
Related Terms:
• Capital Structure
• Leverage
• Long-Term Debt
• Preferred Stock
• Shareholders' Equity
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