Question

long-term debt ratio = long-term debt/longterm debt + total equity Why this ratio might be of...

long-term debt ratio = long-term debt/longterm debt + total equity

Why this ratio might be of interest to investors or creditors, what this ratio tells us and whether the company is performing better or worse to the prior fiscal year. --> F18 = 42% , F19 = 40%

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Answer #1

This ratio might be of the interest to investors or creditors beacuse this Ratio shows the long term solvency of the firm

Long term debt includes long term borowwings from the financial institutions , debenturs / bonds , bank borrowings etc

Total Equity includes the share holders equity

A high long term debt ratio indicates the less protection to creditors and a low ratio indicates safety to the creditors

ie the creditors feel owners fund would aborb any possible losses which may occur

Here the ratio has decreased from 42% to 40%

the decrease in the ratio is Favorable for the creditors

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