The ratio is calculated by taking the company's long-term debt and dividing it by the book value of common equity. The greater a company's leverage, the higher the ratio. Generally, companies with higher ratios are thought to be more risky.
A high ratio usually indicates a higher degree of business risk because the company must meet principal and interest on its obligations. Potential creditors are reluctant to give financing to a company with a high debt position. However, the magnitude of debt depends on the type of business. For example, a bank may have a high debt ratio but its assets are generally liquid. A utility can afford a higher ratio than a manufacturer because its earnings are more stable.
| Ticker | Name | LT Debt / Equity % | StockRank™ |
|---|---|---|---|
| NMQ:RDUS | Radius Health Inc | -139876.12 | 16 |
| NSQ:AAL | American Airlines Inc | -99050 | 53 |
| OTC:MHPC | Manufactured Housing Properties Inc | -89170.31 | 70 |
| NSI:CANDC | C & C Constructions | -47836.26 | 28 |
| NYQ:HLT | Hilton Worldwide Holdings Inc | -25906.67 | 76 |
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