Long-term debt ratio

Long-term debt ratio

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

Long-Term Debt/Capitalization 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 sum of its long-term debt and its preferred and common stock. Put graphically:

Ratio = Long-term debt / (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 ?
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