Debt to Total Capitalization Sample Clauses

The Debt to Total Capitalization clause defines a financial ratio that measures a company's total debt as a proportion of its total capitalization, which typically includes both debt and equity. In practice, this clause is often used in loan agreements or covenants to set a maximum allowable ratio, ensuring that the borrower maintains a balanced capital structure. By establishing this limit, the clause helps lenders manage risk by preventing the borrower from becoming excessively leveraged, thereby protecting the lender’s interests and promoting the financial stability of the borrower.