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Debt to total capitalization, also known as the Long-Term Debt To Total Capitalization Ratio - A ratio that measures the financial leverage of a firm. The ratio is calculated by dividing long-term debt by the

amount of capital available (both long term debt and stockholders' equity). The Long-Term Debt To Capitalization Ratio has the same objective as the debt to equity ratio.

This ratio identifies the amount of long term funds supplied by creditors, thus giving an investor the amount of leverage utilized by a specific company and provides a quantitative analysis of the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios

The calculation for long-term debt to total capitalization is as follows:

Long-Term Debt To Capitalization Ratio = Long-term Debt/Long-term debt + Stockholder's Equity

Example:

Amazon
In Millions

PERIOD ENDING

31-Dec-08

31-Dec-07

31-Dec-06

Total Current Liabilities	4,746	3,714	2,532
Long Term Debt	533	1,282	1,267
Other Liabilities	363	292	133
Total Liabilities	5,642	5,288	3,932

Total Stockholder Equity	2,672	1,197	431
Long Term Debt to Total Capitalization Ratio	16.6%	51.7%	74.6%
Long Term Debt to Total Capitalization	533 / 3,205	1,282 / 2,479	1,267 / 1,698

I believe this is one of the most important metrics to measure and manage as you create strategic plans.