A variation of the traditional debt-to-equity ratio, this value computes the proportion of a company's longterm debt compared to its

available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.

What Does the Debt to Capital Ratio Mean to Industry and the Investor?
Industry and investors will possibly look at the relative size of the Debt to Capital ratio. The reason for this is that a high Debt to Capital ratio can possibly indicate that an organization has a relatively high commitment to pay fixed interest charges. The frequency of these fixed interest charges will be dependent on the terms of the long-term finance. It is worth noting that it is always critical to take professional investment advice before making any financial investment decisions. The Debt-to-Capital ratio also gives the investor indicators of the organizations ability to borrow money.

Why Does Industry View the Debt-to-Capital Ratio as Important?

Investors find it useful to compare the Debt to Capital ratio of a company compared to the Debt to Capital ratio of comparative companies and the industry. This helps give a comparative gauge of how the organization is perceived from a risk perspective. The Debt to Capital ratio is only an indicator and simply raises more questions, however it is still a crucial financial ratio. Historical Debt to Capital ratio analysis also provides useful information, because this historical analysis (when compared with the industry analysis) can help provide some insights into the historical risk level of the business.

Is a Historically High Debt-to-Capital Ratio Good or Bad for the Investor?

Simplistically the greater the proportion of debt (and therefore the higher the Debt-toCapital ratio) the higher the perceived risk of the organisation. However history is only one indicator of future performance. Again it is also important to take professional investment advice before making investment decisions FOR EVERY 1 RE OF INTEREST

OPERATING LEAVERAGE\ Investopedia explains Degree Of Operating Leverage - DOL This ratio is useful as it helps the user in determining the effects that a given level of operating leverage has on the earnings potential of the firm. This ratio can also be used to help the firm determine the most appropriate level of operating leverage in order to maximize the company's EBIT.

CHANGE IN EBIT/CHANGE IN SALES