What is the 'DebtToCapital Ratio'
The debttocapital ratio is a measurement of a company's financial leverage, calculated as the company's debt divided by its total capital. Debt includes all shortterm and longterm obligations. Total capital includes the company's debt and shareholders' equity, which includes common stock, preferred stock, minority interest and net debt.
Calculated as:
BREAKING DOWN 'DebtToCapital Ratio'
Companies can finance their operations through either debt or equity. The debttocapital ratio gives users an idea of a company's financial structure, or how it is financing its operations, along with some insight into its financial strength. The higher the debttocapital ratio, the more debt the company has compared to its equity. This tells investors whether a company is more prone to using debt financing or equity financing. A company with high debttocapital ratios, compared to a general or industry average, may show weak financial strength because the cost of these debts may weigh on the company and increase its default risk.
Because this is a nonGAAP measure, in practice, there are many variations of this ratio. Therefore, it is important to pay close attention when reading what is or isn't included in the ratio on a company's financial statements.

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