Given the current state of the world economy, many investors try to hedge their bets by buying stocks that are expected to recover from the current recession and the market volatility. However, buying stocks that have negative returns is not a good idea for a few reasons: a) these stocks are more likely to go down; and b) in the long run, these stocks are likely to go down even more than the average stock market. This is because the value of a company is primarily determined by the present value of its cash flow. It can be estimated by using a financial ratio known as the “debt-to-equity ratio”.
This calculator uses a mathematical formula to calculate the current debt to equity ratio of an organisation. The calculator is useful for tracking the debt to equity ratio over time.
If you are interested in the long term debt to equity ratio, please take a look at the formula and the calculator we have prepared for you. In essence, the long term debt to equity ratio (LD/E) is a quick, easy and accurate way to put a value on a company’s ability to meet short term debt obligations.. Read more about debt to equity formula and let us know what you think.This is a comprehensive guide to calculating the long-term debt ratio, with detailed interpretation, examples and analysis. You will learn how to apply his formula to assess a company’s ability to repay its debts.
The long-term debt ratio, also known as the long-term leverage ratio, is a capital structure ratio that provides information about a company’s financial strength.
This ratio compares a company’s long-term debt to its equity, which gives you an idea of how the company finances its core business (through equity and debt financing).
The long-term debt/equity ratio differs from the usual debt/equity ratio because it only takes into account long-term debt (excluding short-term debt which the company may have).
This ratio provides information on the respective claims of creditors and owners on the company’s assets.
The ideal range for this ratio depends on the industry in which the company operates, as some industries make greater use of debt financing than others.
For example, financial institutions have a higher ratio because they borrow money to make more loans.
You will see that capital intensive industries have a higher ratio than other industries that are not as capital intensive.
However, as an investor, you should look for companies with low long-term debt ratios, because you don’t want to put your money into a company with a lot of debt.
To calculate the ratio of long-term debt to equity of a company, the following formula can be used:
The L/E ratio is a metric that is used to compare the risk between a company’s debt and equity. In simple terms, the L/E ratio gives you an inside view on the company’s financial health. The L/E ratio shows what percentage of a company’s equity is held by its debt. It is important to note that a high L/E ratio does not necessarily indicate a high risk, as other factors play a role in valuing a company.. Read more about debt to equity ratio interpretation and let us know what you think.
Frequently Asked Questions
What is a good long term debt to equity ratio?
A good long term debt to equity ratio is below 1.
Is a low long term debt to equity ratio good?
A low long term debt to equity ratio is good.
Is a 30/70 Debt to equity ratio good?
A 30/70 debt to equity ratio is considered good.