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Leverage Ratios

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Financial management: theory and practice

By Eugene F. Brigham, Michael C. Ehrhardt :
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.1 ()Total Debts to Assets

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Debt ratio
From 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 liabilities and long-term
liabilities) and total assets (the sum of current assets, fixed assets, and other assets such as
'goodwill').

or alternatively:

For example,
a company with $2 million in total assets and $500,000 in total liabilities would have a debt
ratio of 25% Like all financial ratios, a company's debt ratio should be compared with their
industry average or other competing firms.
Total liabilities divided by total assets.
The debt/asset ratio shows the proportion of a company's assets which are financed through
debt.
If the ratio is less than 0.5, most of the company's assets are financed through equity.
If the ratio is greater than 0.5, most of the company's assets are financed through debt.
Companies with high debt/asset ratios are said to be "highly leveraged," not highly liquid as
stated above. A Company with a high debt ratio (highly leveraged) could be in danger if
creditors start to demand repayment of debt.
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"Financial Management " By Carlos Correia, David Flynn, Enrico Uliana, Michael Wormald:
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.2 ()Debt to Equity
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"Financial Management " By Carlos Correia, David Flynn, Enrico Uliana, Michael Wormald:

Debt to Shareholders Equity
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5,438,539 14,095,951 = 0.39
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1:1 %50