Long-Term Debt to Total Assets Ratio Calculator
Measure the proportion of a company's assets financed by long-term debt obligations
| Ratio Range | Interpretation | Your Ratio | Status |
|---|---|---|---|
| Below 0.3 | Low leverage (Conservative) | - | - |
| 0.3 - 0.5 | Moderate leverage (Balanced) | - | - |
| 0.5 - 0.7 | High leverage (Aggressive) | - | - |
| Above 0.7 | Very high leverage (Risky) | - | - |
The Long-Term Debt to Total Assets Ratio measures the percentage of a company's assets that are financed with long-term debt. It indicates financial leverage and risk exposure.
• Increase equity financing
• Pay down long-term debt
• Improve asset utilization
• Refinance at lower rates
• High interest expenses
• Reduced financial flexibility
• Covenant violations risk
• Vulnerability to economic downturns
A Long-Term Debt to Total Assets Ratio Calculator helps businesses and investors assess what portion of a company's assets are financed by long-term debt. This leverage ratio is critical for evaluating financial risk and capital structure stability.
How the Calculator Works
Formula
Where:
Long-Term Debt = Loans & financial obligations due beyond 1 year
Total Assets = Everything the company owns (current + non-current)
Example Calculation
| Financial Data | Amount ($) |
|---|---|
| Long-Term Debt | 1,200,000 |
| Total Assets | 4,000,000 |
| Ratio | 30% (1,200,000 ÷ 4,000,000 × 100) |
Interpretation:
< 20%: Conservative (low leverage)
20-40%: Moderate (typical for stable industries)
> 50%: Aggressive (high financial risk)
Key Inputs Required
Long-Term Debt (from balance sheet):
Bank loans (maturity >1 year)
Bonds payable
Capital leases
Deferred tax liabilities
Total Assets:
Current assets (cash, inventory, receivables)
Non-current assets (PP&E, intangible assets)
Why This Ratio Matters
✅ Risk Assessment - Higher ratios indicate greater bankruptcy risk
✅ Creditworthiness - Lenders use it to set loan covenants
✅ Investment Decisions - Helps compare capital structures across firms
✅ Operational Flexibility - Low-debt companies can weather downturns better
Industry Benchmarks
| Industry | Typical Range | Reasoning |
|---|---|---|
| Utilities | 40-60% | Stable cash flows support high debt |
| Technology | 10-25% | Asset-light, growth-focused |
| Manufacturing | 25-40% | Moderate equipment financing needs |
| Real Estate | 50-70% | High property leverage common |
How to Improve the Ratio
✔ Debt Refinancing - Convert short-term debt to longer maturities
✔ Asset Growth - Reinvest profits to expand the asset base
✔ Equity Financing - Issue new shares to pay down debt
✔ Sale-Leasebacks - Monetize owned assets while retaining use
Limitations
⚠ Ignores Interest Rates - Doesn't account for debt cost variability
⚠ Asset Valuation Issues - Book values may differ from market values
⚠ Industry Blind Spot - Capital-intensive sectors naturally carry more debt
Related Ratios
| Ratio | Formula | What It Measures |
|---|---|---|
| Debt-to-Equity | Total Debt ÷ Total Equity | Overall leverage |
| Interest Coverage | EBIT ÷ Interest Expense | Debt service ability |
| Debt-to-Capital | Debt ÷ (Debt + Equity) | Capital structure mix |
When to Recalculate
Before major acquisitions
When considering dividend payouts
During refinancing negotiations
Quarterly for financial health monitoring
Real-World Example: Ford vs. Tesla (2023)
Ford: 45% ratio ($140B debt ÷ $310B assets)
Tesla: 8% ratio ($5B debt ÷ $62B assets)
Analysis: Ford's higher ratio reflects traditional auto financing needs
Final Thoughts
This ratio answers:
"How much of the company's asset base is owned by creditors rather than shareholders?"
Need help calculating yours? Share your debt and asset figures below! 🏦📉