Book Value Of Debt Formula
The book value of debt is comprised of the following line items on an entity s balance sheet.
Book value of debt formula. Once you know the book value divide the value of the debt by the assets. In your question you were correct to identify that the book value of total debt is the value given to borrowings in the liabilities. The formula for the market value of debt is e 1 1 1 r y r t 1 r y where e is the annual interest expense r is the cost of debt t is the total debt and y is the average maturity in years of the debt.
Current portion of long term debt. Found in the long term liabilities section of the balance sheet. Found in the current liabilities section of the balance sheet.
Book value of debt formula below is the formula to calculate book value of debt book value of debt formula long term debt notes payable current portion of long term debt. For example suppose the company has 200 000 in assets and 250 000 in liabilities giving it a 1 25 debt ratio. The formula is given by.
If the result is higher than one that s a sign the company is carrying a large amount of debt.