Bank loans to equity ratio

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Method of calculation

Formula for bank loans to equity ratio: (long-term and short-term credits and loans) / equity * 100%

Ratio's description

This ratio complements the information provided by the debt-to-equity ratio – it informs about the debt resulting from the short- and long-term credits and loans.

Ratio's interpretation

The interpretation of this ratio is adequate to the interpretation of the debt-to-equity ratio.

High ratio's values and their increase over time are interpreted as an increased level of debt resulting from short- and long-term credits and loans, which deteriorates the creditworthiness.

Low ratio's values and their decrease over time are interpreted as a decreased level of debt resulting from short- and long-term credits and loans, which improves the creditworthiness.