Debt-To-Capital Ratio

A high DTCR compared to industry average shows weak financial strength.

A company’s Debt to Capital Ratio should be L.T. 80% of the industry average.

A measurement of a company’s financial leverage, calculated as the company’s debt divided by its total capital.

Shareholders Equity = ($shares) X (#shares)

 

Debt to Capital Ratio = Interest-bearing Debt/shareholders’ Equity + Interest-Bearing Debt

Debt includes all short-term and long-term obligations. Total capital includes the company’s debt and shareholders’ equity, which includes common stock, preferred stock, minority interest and net debt.

Interest-bearing debt includes bonds payable, bank loans, notes payable, etc. Non-interest bearing debt includes trade payable, accrued expenses, etc.

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