Debt & Solvency Ratios
How much leverage is on the balance sheet?
Solvency and leverage ratios show how much of a company is financed by debt versus equity, and whether its earnings and cash flow can comfortably service that debt over the long run. High leverage can amplify returns in good times but raises the risk of distress when earnings fall. These metrics help investors judge whether a company's capital structure is sustainable.
Put these metrics to work
Screen stocks by leverage12 terms in this topic
Debt ratio
A leverage ratio showing the proportion of a company's assets financed by debt, calculated as total debt divided by total assets.
Debt to equity ratio (D/E)
A financial leverage ratio comparing total liabilities to shareholders' equity, indicating how much debt a company uses to finance its assets relative to equity.
Debt coverage ratio
A measure of a company's ability to service its debt with its net operating income, commonly used in real estate and corporate finance.
Interest coverage ratio
A debt ratio measuring how easily a company can pay interest on outstanding debt, calculated as EBIT divided by interest expenses.
Solvency ratio
A key metric measuring whether a company's cash flow is sufficient to meet its long-term liabilities, indicating long-term financial stability.
Equity multiplier
A financial leverage ratio showing how much of a company's assets are financed by equity, calculated as total assets divided by total equity.
Capitalization ratio
A metric that measures a company's debt component in its capital structure, calculated as total debt divided by total debt plus shareholders' equity.
Net debt
A liquidity metric showing a company's overall debt situation, calculated as short-term and long-term debt minus cash and cash equivalents.
Net debt/EBITDA ratio
A leverage ratio measuring a company's ability to pay down debt, calculated as net debt (total debt minus cash) divided by EBITDA.
Total debt
The sum of all short-term and long-term debt obligations, including bonds, loans, and other borrowed funds that must be repaid.
Total liabilities
The sum of all financial obligations and debts owed by a company, including both current liabilities due within a year and long-term liabilities.
Altman Z-Score
A credit-strength score combining five financial ratios to estimate a company's risk of bankruptcy within two years, with higher scores indicating lower risk.