Debt Ratio Calculator - Glossary:Using our debt ratio calculator, helps to compare, measure, understand the overall health of the business.
Debt Ratio:Debt ratio are used to compare debt (total liabilities) to its total assets. It shows proportion of a company's assets that financed by debt.
How to calculate?Formula: Debt Ratio = Total Liabilities/Total Assets
This is a balance sheet component; the values are commonly stated against Total Liabilities and Total Assets.
Total Liabilities:Total Liabilities is the source of the funds such as short term and long term external borrowing that is mainly used to fund its asset purchase.
Total Assets:Total assets are the sum of all current and noncurrent assets that a company owns.
Debt ratio for a company with a total liability of $30,000 and total assets of $100,000 is 0.36:1. It means that, 36% of its assets are financed by debt.