Long Term Debt To Total Assets Ratio

AAA

DEFINITION of 'Long Term Debt To Total Assets Ratio'

A measurement representing the percentage of a corporation's assets that are financed with loans and financial obligations lasting more than one year. The ratio provides a general measure of the financial position of a company, including its ability to meet financial requirements for outstanding loans. A year-over-year decrease in this metric would suggest the company is progressively becoming less dependent on debt to grow their business. The calculation for the long term debt to total assets ratio is:


Long term debt to total asset ratio = long term debt / total assets

INVESTOPEDIA EXPLAINS 'Long Term Debt To Total Assets Ratio'

For example, if a company has $100,000 in total assets with $40,000 in long term debt, its long term debt to total asset ratio would be $40,000/$100,000 = 0.4. This indicates that the company has $0.4 in long term debt for each dollar it has in assets. In order to compare the overall leverage position of the company, investors should look at comparable firms and the historical changes in this ratio.

RELATED TERMS
  1. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  2. Asset

    1. A resource with economic value that an individual, corporation ...
  3. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  4. Debt/Equity Ratio

    A measure of a company's financial leverage calculated by dividing ...
  5. Net Liquid Assets

    A measure that examines a company's net liquid financial assets. ...
  6. Expanded Accounting Equation

    The expanded accounting equation is derived from the accounting ...
Related Articles
  1. Getting On The Right Side Of The P/E ...
    Fundamental Analysis

    Getting On The Right Side Of The P/E ...

  2. Will Corporate Debt Drag Your Stock ...
    Investing Basics

    Will Corporate Debt Drag Your Stock ...

  3. 5 Must-Have Metrics For Value Investors ...
    Active Trading

    5 Must-Have Metrics For Value Investors ...

  4. Introduction to Types of Trading: Fundamental ...
    Trading Strategies

    Introduction to Types of Trading: Fundamental ...

comments powered by Disqus
Hot Definitions
  1. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  4. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  5. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center