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Investment Dictionary


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Total Debt

 

Definition

 

The understanding of the total debt may be different depending on the experience of the user. Traditionally, ‘total debt’ includes financial liabilities of the company, although others may use all liabilities to calculate this ratio.

 

Formula


Total debt = Non-current financial liabilities + Current financial liabilities 

 

Another formula

 

Total debt = Non-current liabilities + Current liabilities

 

* Normally, total debt includes all financial liabilities, but also is popular to understand debt as all liabilities. 

 

The higher is the debt of the company the higher may be the risk of it, but in reality the riskiness of a company depends on many factors, and to measure it debt should be compared to other indicators. Total debt is not as meaningful ratio as ‘net debt’ is, but it also can be used for many ratios as ‘cash debt coverage ratio’. 

 






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