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Separate debt from other obligations
The fictional issuer reports interest-bearing debt of 1,200 and other liabilities of 600. Total liabilities are therefore 1,800. Equity is 1,200, and total assets of 3,000 reconcile to liabilities plus equity.
Label each numerator
| Numerator convention | Numerator | Ratio to equity |
|---|---|---|
| Interest-bearing debt | 1,200 | 1.0× |
| Total liabilities | 1,800 | 1.5× |
Treat the difference as a convention difference
Neither quotient is a calculation error when it is correctly labelled. They summarize different sets of obligations. Comparing one company’s interest-bearing-debt measure with another company’s total-liabilities measure could misstate the relative leverage.
Use the report’s definitions
Read the source definition and supporting notes before combining data. Debt maturities, contractual terms and off-balance-sheet commitments can add further context that this simple quotient does not capture.