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. Debt/Equity Ratio

    A measure of a company's financial leverage calculated by dividing ...
  3. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  4. Net Liquid Assets

    A measure that examines a company's net liquid financial assets. ...
  5. Asset

    1. A resource with economic value that an individual, corporation ...
  6. Accident Year Experience

    Premiums earned and losses incurred during a specific period ...
Related Articles
  1. Investing Basics

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  2. Fundamental Analysis

    Getting On The Right Side Of The P/E Ratio Trend

    Buying at the right time is crucial, but how do we know when that is?
  3. Active Trading

    5 Must-Have Metrics For Value Investors

    These quick-and-dirty ratios will help you find the most undervalued stocks on the market.
  4. Trading Strategies

    Introduction to Types of Trading: Fundamental Traders

    Learn about the different traders and explore in detail the broader approach that focuses on company-specific events.
  5. Investing

    Debt Reckoning

    Learn about debt ratios and how to use them to assess a company's financial health. You could save a lot of money!
  6. Credit & Loans

    Debt Ratios

    Learn about the debt ratio, debt-equity ratio, capitalization ratio, interest coverage ratio and the cash flow to debt ratio.
  7. Fundamental Analysis

    What is the difference between profitability and profit?

    Calculating company profit and profitability are not one and the same, and investors should understand the difference between the two terms.
  8. Fundamental Analysis

    Should companies break out accounts receivables into subledgers?

    Find out why every company that sells on credit should break down its accounts receivable into individual customer subsidiary ledgers, or subledgers.
  9. Fundamental Analysis

    What metrics can be used to evaluate companies in the forest products sector?

    Understand some of the best financial and equity valuation measurements that can be utilized to evaluate companies in the forest products sector.
  10. Bonds & Fixed Income

    What is the difference between yield to maturity and the yield to call?

    Determining various the various yields that callable bonds can provide investors is an important factor in the bond purchasing process.

You May Also Like

Hot Definitions
  1. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  2. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  3. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  4. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  5. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  6. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
Trading Center