The Long-Term Debt to Equity Ratio is a financial ratio that compares a company's long-term debts to its shareholders' equity. It is used as a measure of the company's ability to meet its financial obligations in the long term.
The Long-Term Debt to Equity Ratio is a fundamental analysis tool used by investors to determine a company's financial health. It measures the amount of debt a company has relative to its equity, or ownership, in the company.
The ratio formula is:
Long-Term Debt to Equity Ratio = Long-Term Debt / Shareholders' Equity
Where:
- Long-Term Debt: The amount of debt that will take longer than one year to repay. - Shareholders' Equity: The amount of money that investors have contributed to the company, plus any retained earnings.
The Long-Term Debt to Equity Ratio measures the amount of long-term debt relative to shareholders' equity. A high Long-Term Debt to Equity Ratio indicates that a company has a lot of debt relative to its equity, which can be a concern for investors.
On the other hand, a low Long-Term Debt to Equity Ratio indicates that a company has more equity than debt, which is generally seen as a positive sign. However, a very low ratio could indicate that the company is not taking advantage of potential growth opportunities by using debt financing.
In summary, the Long-Term Debt to Equity Ratio is a fundamental analysis tool used to gauge a company's financial health by assessing its long-term debt relative to its shareholders' equity. A low ratio is generally seen as good, while a high ratio can indicate potential financial risks.
Longterm debt to Equity Ratio
Fundamental Analysis Term
The Long-Term Debt to Equity Ratio is a financial ratio that compares a company's long-term debts to its shareholders' equity. It is used as a measure of the company's ability to meet its financial obligations in the long term.
The Long-Term Debt to Equity Ratio is a fundamental analysis tool used by investors to determine a company's financial health. It measures the amount of debt a company has relative to its equity, or ownership, in the company.
The ratio formula is:
Long-Term Debt to Equity Ratio = Long-Term Debt / Shareholders' Equity
Where:
- Long-Term Debt: The amount of debt that will take longer than one year to repay. - Shareholders' Equity: The amount of money that investors have contributed to the company, plus any retained earnings.
The Long-Term Debt to Equity Ratio measures the amount of long-term debt relative to shareholders' equity. A high Long-Term Debt to Equity Ratio indicates that a company has a lot of debt relative to its equity, which can be a concern for investors.
On the other hand, a low Long-Term Debt to Equity Ratio indicates that a company has more equity than debt, which is generally seen as a positive sign. However, a very low ratio could indicate that the company is not taking advantage of potential growth opportunities by using debt financing.
In summary, the Long-Term Debt to Equity Ratio is a fundamental analysis tool used to gauge a company's financial health by assessing its long-term debt relative to its shareholders' equity. A low ratio is generally seen as good, while a high ratio can indicate potential financial risks.