Long-Term Debt to Capitalisation Ratio

The long-term debt to capitalisation ratio is a measure of how leveraged a company is. It measures the company’s long-term debt – debt with more than one year to maturity – relative to long-term debt plus shareholder’s equity. A high ratio means the company’s operations are debt-financed and this could cause difficulties if, for example, interest rates rise (increasing the company’s debt service costs) or if it loses access to refinancing.