facebookIf a company has a high debt to capital ratio, what are the other aspects should I look at before investing? - Seedly

Anonymous

18 Apr 2019

General Investing

If a company has a high debt to capital ratio, what are the other aspects should I look at before investing?

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Isaac Chan

25 Feb 2019

Business at NUS

Since debt to capital measures a company's leverage, you can also consider looking at coverage measures as well. Leverage ratios measures how much capital is from debt. This is a good way to measure whether the company can pay off its debts. There metrics that are debt related as well.

Coverage ratios should also be used. They refer to how is a gauge of the number of times an earnings measure covers an expense measure. One exmaple is EBITDA divided by interest expense.

Other metrics that might wanna look at are liqudity and solvency ratios. Liquidty ratios measure the ability of an organization to pay off its short-term obligations, while solvency ratios looks at measure the ability of a company to meet its long term debts.

Hello, besides looking at the debt to capital ratio, the debt to equity ratio can also be used as an alternative measure to evaluate a company's debt situation. You can also look at the profitability ratios such as the return on equity ratio as well as the return on assets ratio. Always look at a variety of measurements and not rely just on one aspect in order to get a better picture of the company's financial health and performance. Hope this helps!

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