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Quick Definition

Estimates the interest rate a company is paying on its debt.

There's More to Financial Analysis Than You Think...

The Financial Analysis Success Kit can help!

Why you should take a look at the Financial Analysis Success Kit:

We've combined all our highly popular financial analysis tools into one mega-financial-analysis-kit that will save you hundreds of dollars if purchased separately. The kit contains 9 files packed with the most important financial ratio analysis tools you can find to help rocket your way to mastering financial analysis. The kit includes:

  1. The eBook "Learn Ratio Analysis In Minutes"

  2. The Learn Financial Ratio Analysis Excel Spreadsheet (2 versions!)

  3. A BONUS eBook..."Key Financial Statement Terms"

  4. Another HUGE BONUS...Five-Part Financial Ratio Cheat Sheet Series

The result? You get all these professionally created tools for a great low price.

Learn more on our product page:

Click the button to learn more about the Financial Analysis Success Kit

 

financial ratio analysis success kit

Click the button to learn more about the Financial Analysis Success Kit

Interest Expense to Total Debt Formula

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Interest Expense to Total Debt

Explanation of Interest Expense to Total Debt

The Interest Expense to Total Debt ratio measures the estimated interest rate the company is paying on its total debt. This ratio assumes both Short Term Debt and Long Term Debt are summed together, as the Interest Expense figure is usually shown on the income statement as a summation of short and long-term interest expenses.

Importance of Interest Expense to Total Debt

The Interest Expense to Total Debt ratio should not change very much from quarter to quarter, but you may see the ratio change from year to year. If this ratio rises quickly over a given time period, this may indicate the company is paying a higher than normal interest rate on this debt, and may point to credit problems within the company.

A decreasing Interest Expense to Total Debt ratio may indicate the company has either taken on more debt at a lower interest rate, or they have been able to renegotiate the terms of their debt. Acquisitions may also have a positive or negative affect on the overall interest rate, if the company takes over the acquired company’s debt.