debt-to-total-capital ratio

For this debt ratio, long-term debt is compared to a firm’s capital structure. Capital structure refers to all sources of long-term financing (long-term debt and stockholder’s equity). The formula is long-term debt divided by long-term debt plus shareholder’s equity. This ratio measures the amount of debt compared to all financing. A higher ratio indicates higher risk due to higher levels of debt. However, a low level may not be an indication of low risk if current liabilities are high.