Debt-To-Capital Ratio

Starting a company? You'll need capital. And there are two basic ways to get it: debt (take out a loan) and equity (sell a percentage ownership stake in the company).

The debt-to-capital ratio reflects how much of this funding gets done through borrowing.

The figure compares the amount of debt with the amount of capital, basically indicating that the share of total funds sunk into the company have come from borrowing. Capital is computed by adding interest bearing debt with the firm's outstanding equity. Meanwhile, debt includes all liabilities. Debt is then divided by capital to provide the debt-to-capital ratio.

See: Debt-to-Equity Ratio.