Legal Definitions - capitalization ratio

The capitalization ratio is a financial metric that measures the proportion of a company's capital that is raised through equity or debt financing. It is calculated by dividing the amount of capital raised by the total capitalization of the firm.

For example, if a company raises $10 million in equity and has a total capitalization of $50 million, its capitalization ratio would be 0.2 or 20%.

The capitalization ratio is an important indicator of a company's financial health and its ability to meet its financial obligations. A high capitalization ratio indicates that a company has a strong financial position and is less reliant on debt financing, while a low capitalization ratio may suggest that a company is highly leveraged and may be at risk of defaulting on its debt.