Our Debt-to-Assets Ratio Calculator helps you assess a company’s financial structure by comparing its total debt to its total assets.
This ratio reveals the proportion of a company’s assets that are financed by debt, which is crucial for evaluating financial risk.
Debt-to-Assets Ratio Calculator
How to Interpret the Debt-to-Assets Ratio
The Debt-to-Assets Ratio indicates how much of a company’s assets are financed through debt. It is used to assess financial risk and leverage.
Debt-to-Assets Ratio | Interpretation |
---|---|
Below 40% | Low ratio: Healthy financial position, less reliance on debt. |
40% to 60% | Moderate ratio: Balanced use of debt and equity. |
Above 60% | High ratio: Higher financial risk, significant reliance on debt. |
Formula and Calculation
The Debt-to-Assets Ratio is calculated by dividing a company’s total debt by its total assets. This gives a percentage that indicates the proportion of assets funded by debt.
The formula is as follows:
\(\text{Debt-to-Assets Ratio} = \frac{\text{Total Debt}}{\text{Total Assets}} \times 100\)In this formula, “Total Debt” represents the sum of all short-term and long-term liabilities, while “Total Assets” includes both current and non-current assets. Multiplying by 100 converts the result into a percentage.
For example, if a company has $500,000 in debt and $1,000,000 in assets, the Debt-to-Assets Ratio would be calculated as follows:
\(\text{Debt-to-Assets Ratio} = \frac{500,000}{1,000,000} \times 100 = 50\%\)This means that 50% of the company’s assets are financed through debt.
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