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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.
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 .
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.
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).