Definition of Debt Ratio
The debt ratio is also known as the debt to asset ratio or the total debt to total assets ratio . Hence, the formula for the debt ratio is: total liabilities divided by total assets.
The debt ratio indicates the percentage of the total asset amounts (as reported on the balance sheet ) that is owed to creditors .
The larger the debt ratio the greater is the 游戏电竞线上外围APP v5.2 company's financial leverage . The appropriate debt ratio depends on the industry and factors that are unique to the company.
Example of Debt Ratio
Assume that a corporation's balance sheet reports total liabilities of $60,000 and total assets of $100,000. The corporation's debt ratio is 0.60 or 60% ($60,000 divided by $100,000).
