Long-Term Debt-to-Equity Ratio Definition
Long Term Debt-to-Equity Definition. A long-term debt-to-equity ratio is a measure investors and lenders use to assess the risk a company presents. The long-term debt ratio is the portion of a firm’s capital that comes from borrowing for more than one year, expressed as a proportion of shareholders’ equity. A high ratio means more debt and thus more risk. Excessive long-term debt can indicate a firm is unable to generate enough capital from profits or selling stock to meet investment needs. Too much debt, both short-term and long-term, means a firm is less likely to be able to meet its debt obligations. Should the company become insolvent, there is less chance that selling off assets will raise enough cash to pay the debt.
→ Learn More