Long-term debt-to-equity ratio

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Long-term debt-to-equity ratio

Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Long-Term Debt-to-Equity Ratio

In risk analysis, a way to determine a company's leverage. The ratio is calculated by taking the company's long-term debt and dividing it by the total value of its preferred and common stock. Put graphically:

Ratio = Long-term debt / (Preferred stock + Common stock)

The greater a company's leverage, the higher the ratio. Generally, companies with higher ratios are thought to be more risky because they have more liabilities and less equity.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
--has significant correlation with Long term debt to equity ratio.
As it can be concluded from the results of the study, investigating effect of 5 factors of financing pattern (age of company, size of company, growth of retained earnings, growth of short-term debts, and growth of long-term debts) on performance assessment indicators(return on assets, return on equity, the ratio of net profit to sales, ratio of operating profit to sales ratio, asset turnover, inventory turnover ratio, current ratio, immediate ratio, turnover ratio, debt to asset ratio, long term debt to equity ratio) showed that there is correlation, at 95% of certainty, between these variables that is either negative or positive and in some case insignificant.
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