Long Term Debt to Total Capital Ratio Meaning

Long-term debt (defined as debt payable after a year) divided by shareholders equity plus long term debt.

This ratio tells shareholders how much of the total capital invested in the business is debt.

If the ratio is too high, it may indicate that more equity is needed in the business, which could lead to dilution for existing shareholders.

In addition, a long-term debt to total capital ratio that is too high may mean the company could face trouble in the event business slows.

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