Definition: What is Debt to Capital Ratio?
Debt to Capital Ratio is used to measure the proportion of debt which a company use to finance its operation as compared with the capital of the company. This is the liquidity ratio.
This ratio is used to highlight the relationship between debt and equity financing. so it calculates how well the company can handle a downturn in sales.
Through the loan carries, financial operations have some level of risks because in this case the company must be paid principal and interest to the lender.
The company which have high debt to capital ratio is more risky company and it is must for a company to maintain the same level of sales in order to meet the debt service obligations of the company. Now you can learn about Debt to Capital Ratio Formula.
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