• Debt Ratio
  • Debt Ratio

    DEFINITION OF 'Debt Ratio'

    Debt ratio (Debt to assets ratio)

    This ratio compares the company debt with total assets and gives general idea about the amount of leverage used by the company. The higher the ratio, more risky company is because most of assets financed through debt. Lower the ratio, less risky the company is because of stronger equity positions.

    Formula = Total Debt/Total Assets

    Where:

    Total Debt = Short term debt + Long term debt

    Total assets = Current asset + Fixed assets

     

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