Sample analysis of company's Capital Structure

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Capital structure is the combination of debt and equity to finance a company. It is usually measured as either ratios of debt to equity or ratio of debt to assets. To overview the financial strength of a company, there are four leverage ratios can be used; Debt ratio, Debt equity ratio, Equity multiplier and Interest coverage ratio. Generally, the most used by analysts are the Debt ratio and Debt equity. These two are popular measurements tools in evaluating a company’s capital structure.

Formula of Debt ratio = Total Liabilities / Total Assets, then multiplied by 100%

Debt equity ratio = Long term liabilities / Total shareholder’s equity

The Computation of Capital Structure of Firm

	Debt Ratio		Debt Equity Ratio
Formula	Total Liabilities	x 100%	Long term Liabilities	x 100%
	Total Assets		Total Shareholder Equity
Year
2005	214,928	x 100%	148,375	x 100%
	592,458		239,288
		= 36.27 %		= 62 %
2006	273,631	x 100%	200,011	x 100%
	699,511		244,253
		= 39.12 %		= 81.87 %
2007	325,255	x 100%	170,979	x 100%
	801,772		245,471
		= 40.56 %		= 69.65 %
2008	268,788	x 100%	178,717	x 100%
	903,097		286,383
		= 29.76 %		= 62.30 %
2009	759,387	x 100%	301,570	x 100%
	2,092,791		286,384
		= 36.29 %		= 105.30 %

Table 2. The Computation of Ratios in Percentage for the Firm.

Year	2005	2006	2007	2008	2009
Debt ratio	36.27%	39.12%	40.56%	29.76%	36.29%
Debt Equity Ratio	62%	81.87%	69.65%	62.30%	105.30%