Debt to Capital Ratio Calculator

Understanding the Debt-to-Capital Ratio

The Debt-to-Capital Ratio (D/C ratio) is a critical solvency ratio that measures the proportion of a company's total capital structure that is funded by interest-bearing debt relative to shareholders equity. It helps financial analysts, investors, and rating agencies assess a firm's financial leverage and default risk.

Debt-to-Capital Ratio Formula

The Debt-to-Capital Ratio is calculated using the following formula:

$$\text{Debt-to-Capital Ratio} = \frac{\text{Short-Term Debt} + \text{Long-Term Debt}}{\text{Total Debt} + \text{Shareholders' Equity}} \times 100$$

Where $\text{Total Capital} = \text{Total Debt} + \text{Shareholders' Equity}$.

Interpreting D/C Ratio Values

• Low D/C Ratio (Below 30%): Indicates conservative capital structure with low reliance on debt financing and lower financial risk.
• Moderate D/C Ratio (30% to 50%): Indicates balanced capitalization typical for established corporate borrowers.
• High D/C Ratio (Above 50% to 60%): Indicates high financial leverage, increased interest burden, and heightened sensitivity to economic downturns.

You can also use our Debt to Equity Ratio Calculator, analyze with the Financial Leverage Ratio Calculator, or try our WACC Calculator.