gjeldsgrad

Gjeldsgrad is a financial metric used to describe the leverage of an entity, indicating how much of its funding comes from debt relative to equity. In Norwegian finance, the term can refer to different but related concepts depending on context, most commonly the debt-to-equity ratio for companies and, in consumer credit, a debt-to-income perspective for households.

For a company, gjeldsgrad is usually calculated as total gjeld divided by egenkapital (debt divided by equity). It is often expressed as a multiple (for example, a gjeldsgrad of 2.0 means the company has twice as much debt as equity) or as a percentage. A higher gjeldsgrad signals greater financial leverage and typically higher financial risk, since fixed debt obligations must be met regardless of earnings.

A related variant is netto gjeldsgrad, which uses net debt (total gjeld minus cash and cash equivalents) in the numerator. This can provide a more conservative view of leverage by accounting for liquidity.

In a household or consumer-credit context, gjeldsgrad can refer to debt-to-income measures, illustrating how much debt exists relative to disposable or gross income. This variant helps lenders assess affordability and repayment risk for borrowers.

Interpretation and use: Gjeldsgrad informs assessments of solvency, creditworthiness, and cost of capital. Regulators and rating agencies may consider gearing when evaluating risk, capital adequacy, and financial resilience. Limitations include its exclusion of cash flow, interest coverage, debt maturity structure, and asset quality; sector norms and accounting practices can also affect comparability.