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“Everybody this is coach d with tackle trading dot com. Here to talk to you you about the long term debt to capital ratio. The long term debt to capitalization is a slightly different rendition of the traditional debt to equity ratio. And it shows the financial leverage of a firm.
It s calculated by dividing the long term debt by total available capital. Which again long term debt preferred and common stock are all factored into this the long term debt capitalization ratio is calculated by taking that long term debt and dividing it by total available capital. The long term. Debt capital.
Ratio functions as an indication of the financial leverage of a firm and it helps us to identify potential investment risk. A high ratio indicates more risk because debt is the primary source of financing here..
We can take a look at apple computers. We can see that their financial ratios. We can look at their long term debt to capital ratio. And we see it suffering around 42.
And that s up eleven point nine percent. If you look at the last five years you can actually see a pretty steady increase of their utilization of debt and so you could again that s neither a good thing or a bad thing. The one thing. We know about apple is that they had do have a lot of cash on hand.
We also know that they borrowed a lot of money because the interest was low so again. We can see that they did use debt long term debt to help fund growth..
So that s something we can see there. By comparison. Here s microsoft who again looking at the financial ratios. Current.
Long. Term. Debt. Capital.
Ratio. Is a little bit higher..
At forty seven point. Two two which is up twenty three point four three percent year over year and looking at the last five years worth of data. We can also see a steady increase in again long term debt capital ratios. Which would tell me that in this industry.
Both companies are expanding their debt balance sheet their long term. Debt balance sheet compared to their total available. Capital. And again.
They re probably using that to fund growth. Because the interest rates have been very very low..
But we can actually to see that again if they re increasing that ratio. Then we understand that the companies in korea. More debt. That is a pretty simple disc description of the again long term debt to capital ratio.
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