Liabilities to Market Cap and Net Liabilities

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Definition

Liabilities to Market Cap and Net Liabilities (L/MCNL) is the percentage of total liabilities a company has compared to its market capitalization and net liabilities. This solvency metric answers the question, what percent of this company’s valuation is made of liabilities? The sum of market capitalization and net liabilities illustrates the cost to purchase the entire company outright in the stock market (market capitalization) and the cost of the company’s liabilities.

Ratios that are closer to one indicate a higher percentage of liabilities to market capitalization, whereas ratios closer to zero mean the company’s liabilities are lower. In general, the lower this ratio is, the more solvent the company. Companies that have an inflated market capitalization (bull markets) may also report ratios that are lower until the market corrects itself.

Formula

YCharts calculates this formula by Total Liabilities / (Market Capitalization + Net Liabilities)

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