Debt Ratio (in %) – The smaller the numerical ratio the better. The bigger the number the greater the Risk; (a ratio > 1 Indicates more Debt than Assets).
This is one of the Leverage Ratios which shows the risk a company takes in using debt capital to finance asset purchases.
Calculate this ratio using the below equation. Values in the equation can be acquired from the Balance Sheet.
Equation:
Debt Ratio = (Total Debt) ÷ (Total Assets)
Equation results indicate the percentage of a company’s assets financed by short or long-term debt Note: Debt financing increases risk but “levers” up earnings to stockholders