The proportion of total capital (equity + debt) represented by market cap. A higher ratio means the company is predominantly equity-financed — lower financial risk.
Formula: MC / (MC + Total Debt)
How to read it: > 0.7 = predominantly equity-financed (low leverage) · 0.4–0.7 = balanced capital structure · < 0.4 = heavily debt-financed (higher financial risk).
Also known as the equity-to-total-capital ratio, this metric appears in Modigliani-Miller capital structure theory and is widely used in credit analysis to assess leverage.