Search results
Results from the WOW.Com Content Network
The remaining long-term debt is used in the numerator of the long-term-debt-to-equity ratio. A similar ratio is debt-to-capital (D/C), where capital is the sum of debt and equity: D/C = total liabilities / total capital = debt / debt + equity The relationship between D/E and D/C is: D/C = D / D+E = D/E / 1 + D/E
It is important that a company's management recognizes the risk inherent in taking on debt, and maintains an optimal capital structure with an appropriate balance between debt and equity. [9] An optimal capital structure is one that is consistent with minimizing the cost of debt and equity financing and maximizing the value of the firm.
For example, the debt-to-equity ratio and interest coverage ratios are supplemental ways to see how leveraged a company is. Remember that a high debt-to-assets ratio isn’t necessarily a bad thing.
For example, let’s say that your current mortgage loan balance is $360,000. But your home is only worth $300,000. In that case, you would have negative equity of $60,000.
A company's debt-to-capital ratio or D/C ratio is the ratio of its total debt to its total capital, its debt and equity combined. The ratio measures a company's capital structure, financial solvency, and degree of leverage, at a particular point in time. [1] The data to calculate the ratio are found on the balance sheet.
You’ve built up a significant amount of equity. Your debt-to-income ratio is under 43%. You want a lower interest rate than what a personal loan or credit card may offer. You can comfortably ...
A higher debt-to-equity ratio leads to a higher required return on equity, because of the higher risk involved for equity-holders in a company with debt. The formula is derived from the theory of weighted average cost of capital (WACC).
For premium support please call: 800-290-4726 more ways to reach us