Enter the total long-term debt ($) and the total debt ($) into the Long-Term Debt Ratio Calculator. The calculator will evaluate and display the Long-Term Debt Ratio. 

Long-Term Debt Ratio Formula

The following formula is used to calculate the Long-Term Debt Ratio. 

LTDR = LTD / TD * 100
  • Where LTDR is the Long-Term Debt Ratio (%)
  • LTD is the total long-term debt ($) 
  • TD is the total debt ($) 

To calculate the long-term debt ratio, divide the total long-term debt by the total overall debt.

How to Calculate Long-Term Debt Ratio?

The following example problems outline how to calculate Long-Term Debt Ratio.

Example Problem #1:

  1. First, determine the total long-term debt ($).
    • The total long-term debt ($) is given as: 1,000.
  2. Next, determine the total debt ($).
    • The total debt ($) is provided as: 4,000.
  3. Finally, calculate the Long-Term Debt Ratio using the equation above: 

LTDR = LTD / TD * 100

The values given above are inserted into the equation below and the solution is calculated:

LTDR = 1,000 / 4,000 * 100 = 25.00 (%)


FAQ

What is considered long-term debt?

Long-term debt refers to loans or other forms of debt that have a maturity of more than one year. This can include bonds, lease obligations, and other types of loans that are not due to be paid within the next 12 months.

Why is the Long-Term Debt Ratio important?

The Long-Term Debt Ratio is important because it gives investors and creditors insight into a company’s financial structure and its ability to meet its long-term financial obligations. A lower ratio indicates a company may be less leveraged and potentially in a better position to handle its long-term debt, while a higher ratio could suggest a higher risk of financial distress.

How can a company improve its Long-Term Debt Ratio?

A company can improve its Long-Term Debt Ratio by either reducing its total long-term debt or by increasing its total debt capacity, which could involve taking on more short-term debt if it does not significantly increase financial risk. Additionally, improving operational efficiency and profitability can provide more cash flow to service debt, thereby improving the ratio over time.