what is the total debt to capitalization ratio 
the total debt to capitalization ratio is a tool that measures the total amount of outstanding company debt as a percentage of the firm s total capitalization the ratio is an indicator of the company s leverage which is debt used to purchase assets companies with higher debt must manage it carefully ensuring enough cash flow is on hand to manage principal and interest payments on debt higher debt as a percentage of total capital means a company has a higher risk of insolvency the formula for the total debt to capitalization ratio is total debt to capitalization s d l t d s d l t d s e where s d short term debt l t d long term debt s e shareholders equity begin aligned text total debt to capitalization frac sd ltd sd ltd se textbf where sd text short term debt ltd text long term debt se text shareholders equity end aligned total debt to capitalization sd ltd se sd ltd where sd short term debtltd long term debtse shareholders equity 