metrics explained

## Debt-to-Equity Ratio vs Debt-to-Capital Ratio: What's the Difference?

When it comes to corporate finance, there are a lot of ratios and metrics that can be used to measure a company's financial health. Two of the most common ratios used are the debt-to-equity ratio and the debt-to-capital ratio.

## What is the Debt-to-Equity Ratio?

The debt-to-equity ratio, also known as the leverage ratio, is a financial metric used to measure a company's leverage. Leverage is the use of debt to finance a company's assets and operations. The debt-to-equity ratio is calculated by dividing a company's total liabilities by its total shareholder equity.

### What is the Debt-to-Capital Ratio?

The debt-to-capital ratio is a financial metric used to measure a company's capital structure. The debt-to-capital ratio is calculated by dividing a company's total debt by its total capital. Total capital includes both debt and equity.

## What's the Difference Between the Debt-to-Equity Ratio and the Debt-to-Capital Ratio?

The main difference between the debt-to-equity ratio and the debt-to-capital ratio is that the debt-to-equity ratio only includes debt in the numerator, while the debt-to-capital ratio includes both debt and equity in the numerator.

### What are the Implications of a High Debt-to-Equity Ratio?

A high debt-to-equity ratio indicates that a company is highly leveraged. This means that the company is financing its operations with a lot of debt. While this can lead to higher profits if the company's investments are successful, it also increases the company's risk of bankruptcy if the investments don't pan out.

### What are the Implications of a High Debt-to-Capital Ratio?

A high debt-to-capital ratio indicates that a company has a high level of debt relative to its capital. This can be a concern for investors because it means that the company may have difficulty meeting its financial obligations if its income decreases.