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Long Term Debt to Equity Ratio

Definition - What is Long Term Debt to Equity Ratio?

❶Analyst should also understand the ideal capital structure that management is seeking. Post the remaining portion of the debt in the long term liabilities section of the balance sheet.

What is Long-Term Debt-to-Equity?

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BREAKING DOWN 'Long-Term Debt To Total Assets Ratio'
BREAKING DOWN 'Debt/Equity Ratio'

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What is the 'Debt/Equity Ratio'

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The calculation for the long-term debt to total assets ratio is long-term debt / total assets = long-term debt to total assets ratio. Example of Long-Term Debt to Assets Ratio. For example, if a company has $, in total assets with $40, in long-term debt, its long-term debt to total assets ratio is $40,/$, = , or 40 percent.

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To calculate the long term debt ratio, then, we would use the following equation: This gives us a long term debt to total assets ratio of In other words, for every dollar of .

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The long term debt ratio is a solvency or coverage ratio that calculates a company’s leverage by comparing total debt to assets. In other words, it measures the percentage of assets that a business would need to liquidate to pay off its long-term debt. The formula to ascertain Long Term Debt to Total Assets Ratio is as follows: Long Term debt to Total Assets Ratio = Long Term Debt / Total Assets. For Example, a company has total assets worth $15, and $ as long term debt then the long term debt to total asset ratio would be = /15, = This means that the company has $ as a long term debt for every dollar it has in assets.

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Long term debt to total asset ratio explained a measure of the extent to which a company is using long term debt. It is an indicator of the long-term solvency of a company. The higher the level of long term debt, the more important it is for a company to have positive revenue and steady cash flow. By using the formula provided above, you can easily calculate this company’s long term debt to equity ratio, like so: The ratio value of indicates that this company’s long-term debt is much higher than its shareholders’ equity (41% higher).