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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
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.
Financial analysts use some form of leverage ratio to quantify the proportion of debt and equity in a company's capital structure, and to make comparisons between companies. Using figures from the balance sheet, the debt-to-capital ratio can be calculated as shown below. [17]
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.
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Negative equity is a deficit of owner's equity, occurring when the value of an asset used to secure a loan is less than the outstanding balance on the loan. [1] In the United States, assets (particularly real estate, whose loans are mortgages) with negative equity are often referred to as being "underwater", and loans and borrowers with negative equity are said to be "upside down".
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 very common leverage ratio used for financial statement analysis is the debt-to-equity ratio. This ratio shows the extent to which management is willing to use debt in order to fund operations. This ratio is calculated as: (Long-term debt + Short-term debt + Leases)/ Equity. [7]