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 ?
But there is a negative relationship between the long-term debt to equity ratio and profitability [13].
The company's long-term debt to equity ratio increased to 23.5 per cent, compared to 17 per cent at the end of 2011.
The present study aims to investigate relationship between the financing patterns of business units (age of companies, company size, growth in retained earnings, growth in long-term and short-term debt development) and financial performance indicators (return on assets, return on equity, the ratio of net profit to sales , asset turnover ratio, cash flow, ratio of debt to assets, ratio of long-term debt to equity ratio) so that explain effects of capital structure on the performance of it structure.
In other words, by increasing the age of the company, long-term debt to equity ratio decreases.
In other words, the increase in retained earnings of the Company decreases long-term debt to equity ratio.
In other words, increasing the company's short-term debt, decreases long-term debt to equity ratio.
The company's long-term debt to equity ratio dropped to 25.2 per cent."
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