This study introduces an enhanced damage-extent method that incorporates the structural load-bearing capacity of the hull to assess the vulnerability of naval ships to explosive loads. This vulnerability assessment predicts the area of damage to the hull structure and calculates the probability of onboard equipment experiencing functional losses due to the explosive load, thus allowing various design alternatives to be evaluated. The proposed methodology improves upon traditional damage-volume-based approaches, such as damage-radius and ellipsoid methods, by considering the hull's structural stiffness and intrinsic damage resistance. It integrates the hull's structural resistance to the load, enhancing the damage assessment process for both the hull and equipment. This approach facilitates damage prediction for different hull designs by comparing the allowable impulse with the explosive pressure. In assessing the functionality loss and vulnerability of the equipment within the damaged hull, the network of equipment functions is considered. An anti-ship cruise missile with a sea-skimming trajectory is investigated as the explosive charge, with procedures established to simulate its trajectory and impact location on the hull. Hundreds of potential internal and external explosion points are generated, predicting the explosive pressure at each location. The shock wave, including incident overpressure, reflection pressure, and quasi-static gas pressure, is converted into impulses, taking into account the configuration of hull compartments to accurately predict these pressures and equivalent impulse. The resulting impulse is compared with the intrinsic damage capacity of each compartment's structure to assess potential damage. System network and fault tree analysis evaluate the loss of function and vulnerability of equipment within the damaged hull. Finally, the proposed capacity-based damage extent method demonstrates more accurate damage assessment compared to traditional methods, overcoming the limitations of damage-radius and ellipsoid approaches by considering hull strength