Quick Definition
Calculates the ability of a company to meet all of its debt obligations.
Equity to Total Debt Formula
Explanation of Equity to Total Debt
The Equity to Total Debt ratio measures how much #TERMLILNK[Short Term Debt] and #TERMLILNK[Long Term Debt] the company can have and still be able to meet debt obligations with its equity.
Importance of Equity to Total Debt
A high, or increasing Equity to Total debt ratio is usually a positive sign, showing the company is better able to cover its debt. A value of 1.0 means the company has just enough equity to cover its debt (the company is barely solvent), but a value of 2.0 or greater value is desired.
