**Total Debt Ratio**

The total debt ratio measures the amount of debt a company uses. Subtracting total equity from total assets then dividing the result by total assets yields the total debt ratio. For example, if Company A has $3,691 in total assets and $2,467 in total equity, its total debt ratio is 0.33 times ($3,691 - $2,467 / $3,691). In other words, Company A uses 33 percent and has more assets than debts, which means the company does not rely on debt to operate.

**Long-Term Debt Ratio**

Long-term debt ratios measure a company’s financial leverage, debt used by a firm to support its capital structure. The long-term debt ratio is calculated by dividing long-term debt by the result of long-term debt plus total equity. For example, if Company B has $557 in long-term debt and $2,667 in total equity, its long-term debt ratio is 0.17 times ($557 / $557 + $2,667). As a result, Company B has less than 17 percent of debt with maturities lasting longer than one year. Additionally, the company’s assets far exceed its liabilities.

**Reference**"Fundamentals of Corporate Finance", Stephen Ross, 2008

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