Bank loans to equity ratio

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.