I’m getting a bit confused about the debt ratios and not sure how to make sense of it!! According to Schweser, there are 3 ratios: Debt -to- Equity = Long-term liabilities + Def. Tax Liab + PV future leasing oblig / Common + Preferred Long Term Debt to Long Term Capital = LT Liab + Def tax liab + PV Future leasing oblig / (numerator + Common + Pref) Total debt ratio = Current liab + Long Term Debt / (Current liab + LT Debt + Common + Pref) Q1: Why why why do they consider “liabilities” as debt??? Isn’t debt just debt? Or should I just not ask and just accept it? Q2: Are Schweser’s definitions correct i.e. in line with CFA’s official curriculum? Q3: Have any of you done questions which entailed calculating these ratios outright? Haven’t come across and Schweser’s practice qs have just excluded def tax liab for some reason. Doesn’t make sense.
LT liabilities generally have a cost associated with them, same thing as debt, different name. A/P usually don’t have an upfront cost, ie. interest rate. Not sure of Wchweser, never used it. There probably won’t be a detailed question on this on the exam, just a functional, non-calc question.