A Debt to Capital Ratio is a solvency metric that measures the company's ability to meet its debt obligation through the Capital. It calculates the company's capital structure and how the company is financing its total capital.
A low debt-to-capital ratio shows that the company's share capital contains minimum borrowed funds and more equity capital. And high ratio indicates the company is using more debt than equity and has weak financial strength.
The formula for Calculating Debt to Capital Ratio
Example: For the financial year Dixon Technologies (India) Limited reported Total Debt as Rs. 151.92 Cr. and Total Equity as Rs. 889.22 Cr.
The value as per the formula (Total Debt / Total Debt + Total Equity) is calculated as (151.92 / 151.92 + 889.22) = 0.17.