Definition:

Total Debt per Share is a financial metric that indicates the amount of a company's total debt attributable to each outstanding share of its stock. It provides insight into the financial leverage and risk associated with the company's equity.

Examples

If a company has a total debt of $1,000,000 and 100,000 shares outstanding, the Total Debt per Share would be $10. This means each share represents $10 of the company's debt.

Formula:

Total Debt per Share = Total Debt / Total Shares Outstanding

How to use the metric:

Investors and analysts use Total Debt per Share to assess the financial risk associated with holding a company's stock. A higher value may indicate higher financial leverage, which could mean greater risk if the company faces financial difficulties. It can be used to compare companies within the same industry to evaluate their relative financial stability.

Limitations:

Total Debt per Share does not account for the company's ability to service its debt, nor does it consider the quality of the debt or the company's cash flow. It also doesn't provide insight into the company's overall financial health or profitability.

Applies to:

This metric is particularly useful in capital-intensive industries such as utilities, telecommunications, and manufacturing, where companies often carry significant debt to finance operations and growth.

Doesn't apply to:

It may be less relevant for industries with low capital requirements, such as software or service-based industries, where companies typically have lower levels of debt. In these sectors, other metrics like earnings per share or cash flow per share might be more informative.

Summary:

Total Debt per Share is a useful metric for assessing the financial leverage of a company on a per-share basis. While it provides insight into the debt burden associated with each share, it should be used in conjunction with other financial metrics to gain a comprehensive understanding of a company's financial health and risk profile.