Debt-to-Market Ratio
factor.formula
Market value debt ratio:
In the formula:
- :
Refers to the total amount of liabilities of a company at the end of the most recent reporting period, including current liabilities and non-current liabilities. The specific value is usually taken from the balance sheet in the company's financial statements. This value reflects the total amount owed by the company to its creditors and is an important basis for assessing the company's debt repayment ability.
- :
Refers to the total market value of a company, calculated by multiplying the market price of the company's stock by the total number of shares issued. The total market value represents the market's overall assessment of the company's equity value and is a key indicator of a company's size and market position. The total market value should be calculated using the market value at the end of the same reporting period.
factor.explanation
The market value-to-debt ratio is a key indicator to measure a company's level of financial leverage. A higher ratio usually means that the company has a higher debt burden and potential financial risks. However, in some industries, moderate financial leverage may help improve a company's profitability. Therefore, when evaluating this ratio, a comprehensive analysis should be conducted in combination with industry characteristics, company development stage, and other financial indicators. This ratio is often used by value investors to screen companies with low valuations but financial risks and conduct further in-depth research. In addition, this ratio can also be used for horizontal comparisons between companies, as well as vertical comparisons of the same company in different periods to monitor the company's financial health. It should be noted that the total market value changes dynamically, so the ratio should also be updated with changes in market prices.