Which ratio focuses exclusively on a firm's long-term debt?

The debt-to-equity ratio is a financial metric that specifically measures the relationship between a company’s long-term debt and its equity. This ratio highlights how much debt the firm is using to finance its assets relative to the equity held by shareholders. By focusing solely on long-term debt, this ratio provides insights into the company’s financial leverage and indicates the proportion of financing that comes from creditors versus owners.

Analyzing the debt-to-equity ratio can help stakeholders understand the risk associated with the company’s capital structure. A higher ratio might suggest that a company is more leveraged, potentially indicating greater financial risk, whereas a lower ratio may imply a more conservative approach, with less reliance on borrowed funds. This makes the debt-to-equity ratio a crucial tool for assessing the long-term financial stability and risk profile of a firm.