Total Capitalization Ratio:
Total capitalization ratio indicates the leverage/debt component of a firm. It also tests the soundness of capital structure of a company. Higher share of share holder’s equity in the Capital Structure shows the better solvency position of a company. This ratio supports the company growth and operations. A low equity share will be risk for the creditors of the company. We calculate this ratio as under:-
| Total Capitalization Ratio = | Long Term Debt |
| Long Term Debt + Share Holder's Equity |
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