Debt capital divided by total assets. This will tell you how much the company relies on debt to finance assets. When calculating this ratio, it is conventional to consider both current and non-current debt and assets. In general, the lower the company's reliance on debt for asset formation, the less risky the company is since excessive debt can lead to a very heavy interest and principal repayment burden. However, when a company chooses to forgo debt and rely largely on equity, they are also giving up the tax reduction effect of interest payments. Thus, a company will have to consider both risk and tax issues when deciding on an optimal debt ratio.
Related information about debt ratio:
- Debt ratio - Wikipedia, the free encyclopedia
Debt Ratio is a financial ratio that indicates the percentage of a company's assets that are provided via debt. It is the ratio of total debt (the sum of current ...
- Debt Ratio Definition | Investopedia
A ratio that indicates what proportion of debt a company has relative to its assets. The measure gives an idea to the leverage of the company along with the ...
- Debt Ratios: The Debt Ratio | Investopedia
See this section for a detailed explanation and calculations for the Debt Ratio.
- Debt Ratios: Cash Flow To Debt Ratio | Investopedia
Cash Flow to Debt Ratio measures the company's ability to cover debt form its yearly cash flows. See this section for a detailed explanation and calculations.
- The Debt Ratio, and how it affects your borrowing power
This percentage is called the debt ratio. Let's say you make $3000 a month and have no debt. The bank would figure that you weren't overextended as long as ...
- Debt Ratio - Financial Dictionary - The Free Dictionary
A measure of a company's total debt to its total assets. A ratio less than one means that a company has more assets than debt, while a ratio of more than one ...
- Debt Ratio Definition & Example | InvestingAnswers
We explain the definition of Debt Ratio, provide a clear example of the formula and explain why it's an important concept in business, finance & investing.
- Debt-to-income ratio calculator
Use this calculator to compute your personal debt-to-income ratio, a figure as important as your credit score which provides a snapshot of your overall financial ...