In page 143 of Schweser reading 42 on Fundamentals of Credit Analysis, Debt / capital = Debt / (Debt + Equity), however the challenge problem in page 162 calculated Debt / capital as Debt / ( Liabilities + Equity). Is the calculation in the challenge problem wrong?
Would appreciate any help on this, thanks!
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I don’t have the Schweser books but both of the calculations are correct. There are many ways to calculate financial leverage and the ability to firm to service its debt. The first ratio you gave is Long-term debt to capital and the second is total debt-to-capital.
Total debt to capital would include debt like obligations that are not a part of the general debt. i.e operating leases.
Reread the question and she was it really asks