Debt-to-Assets Ratio Calculator

Data Source and Methodology

All calculations are strictly based on the formulas and data provided by authoritative financial sources. For more details, refer to BDC's Debt-to-Asset Ratio Guide. All calculations are rigorously based on the formulas and data provided by this source.

The Formula Explained

Debt-to-Assets Ratio = \(\frac{\text{Total Debt}}{\text{Total Assets}}\)

Glossary of Variables

• Total Debt: The sum of all short-term and long-term debts.
• Total Assets: The total value of everything the company owns, including cash, inventory, and property.
• Debt-to-Assets Ratio: A financial ratio indicating the percentage of a company’s assets that are provided via debt.

How It Works: A Step-by-Step Example

Consider a company with a total debt of $500,000 and total assets of $1,250,000. The debt-to-assets ratio is calculated as:

Debt-to-Assets Ratio = \(\frac{500,000}{1,250,000} = 0.4\)

This means that 40% of the company's assets are financed by debt.

Frequently Asked Questions (FAQ)

What is the Debt-to-Assets Ratio?

The debt-to-assets ratio is a financial metric that indicates the percentage of a company’s assets that are financed by debt. It helps assess financial leverage.

Why is the Debt-to-Assets Ratio important?

The ratio provides insights into a company's financial leverage and risk. A higher ratio indicates more leverage and potentially higher risk.

How do I use the Debt-to-Assets Ratio?

Use the ratio to compare a company’s debt to its assets. A lower ratio suggests greater financial stability.

What is a good Debt-to-Assets Ratio?

This depends on the industry and the specific company. Generally, a ratio below 0.5 is considered good.

Can the Debt-to-Assets Ratio be negative?

No, since total debt and assets are always positive values, the ratio will always be zero or positive.