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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.
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
Liquidity ratios measure the availability of cash to pay debt. [3] Efficiency (activity) ratios measure how quickly a firm converts non-cash assets to cash assets. [4] Debt ratios measure the firm's ability to repay long-term debt. [5] Market ratios measure investor response to owning a company's stock and also the cost of issuing stock. [6]
The (short term) goals of working capital are therefore not approached on the same basis as (long term) profitability, and working capital management applies different criteria in allocating resources: the main considerations are (1) cash flow / liquidity and (2) profitability / return on capital (of which cash flow is probably the most important).
Share in GDP of US financial sector since 1860 [1]. Financialization (or financialisation in British English) is a term sometimes used to describe the development of financial capitalism during the period from 1980 to present, in which debt-to-equity ratios increased and financial services accounted for an increasing share of national income relative to other sectors.
The classification of liabilities also plays a role in determining financial ratios, such as the current ratio—calculated as current assets divided by current liabilities. A higher current ratio indicates that the business has sufficient current assets to cover its obligations over the coming year, suggesting stronger liquidity. [ 1 ]
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Debt capital differs [1] from equity or share capital because subscribers to debt capital do not become part owners of the business, but are merely creditors, and the suppliers of debt capital usually receive a contractually fixed annual percentage return on their loan, and this is known as the coupon rate.