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Debt ratio

Debt ratio

Description

The debt ratio (debt to assets) is used to compare company's total debt to its total assets. This measure shows the proportion of assets, bought from borrowed funds. Data to calculate this ratio is collected from balance sheet.

Norms and limitations

If a debt ratio is higher than 1 it indicates that a company has more debt that assets. If this ratio is lower than 1, the level of assets is higher than debt within the company.

To make things clearer, it is worth mentioning that the higher the ratio is, the greater financial risk the company is facing. The value of debt ratio is highly dependent on the industry that the company is operating in.

Read more... View all financial ratios calculators