Meaning & use
debt to capitalization ratio
Last updated
Meaning
nouncountablefinance
A financial measure showing the proportion of a company's total capital that comes from debt.
Grammar: Countable; often used with 'a' or in the plural. Typically followed by 'of' when specifying the company.
Patterns
- debt to capitalization ratio of a company
- calculate the debt to capitalization ratio
The company's debt to capitalization ratio is 40%, meaning 40% of its capital is debt.
Analysts use the debt to capitalization ratio to assess financial risk.
A high debt to capitalization ratio may indicate that a company is highly leveraged.
Common combinations
- high debt to capitalization ratio
- The firm has a high debt to capitalization ratio, which worries investors.
- calculate the debt to capitalization ratio
- You can calculate the debt to capitalization ratio by dividing total debt by total capital.
- debt to capitalization ratio of
- The debt to capitalization ratio of the company increased after the loan.
Synonyms and how they differ
- debt ratio
- Debt ratio is a broader term; debt to capitalization ratio specifically compares debt to total capital.
Commonly confused: debt to capitalization ratio or debt to equity ratio?
debt to capitalization ratio vs debt to equity ratio
Debt to equity ratio compares debt to shareholders' equity, while debt to capitalization ratio compares debt to total capital (debt plus equity).
Practice
The debt to capitalization ratio measures the proportion of a company's capital that comes from ________.
Choose one answer.
The ratio specifically looks at debt as a share of total capital. Equity is the other component, and assets and revenue are not part of the ratio.
Make it your own
Write a sentence using “debt to capitalization ratio”, then check it and compare it with the examples above.