Debt to Capital Ratio Formula is used to find the riskiness of the company. If the result given by the formula is greater then 1 for any company then the company has more debt as compared to its capital and the company is riskier.
If the result is less then 1 then the capital of the company is greater then the debt of the company and the company is less risky for investors.
Debt to Capital Ratio Formula can be calculated by dividing the total debt of the company by the sum of shareholder’s equity and total debt.
Debt to Capital Ratio Formula = Total Debt/(Total Debt + Shareholder’s Equity)
Total debt in the formula represent all the long term and short term liabilities and Shareholder’s equity represents the company’s all equity. You can also learn about Debt to Capital Ratio.
Financial Ratios: learn about all ratios definitions and formulas.