Debt ratio: Difference between revisions
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imported>Doug Williamson (Create page. Sources: https://www.accountingcoach.com/blog/debt-ratio, https://investinganswers.com/financial-dictionary/ratio-analysis/debt-ratio-357) |
imported>Doug Williamson (Add links.) |
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The debt ratio is designed to indicate the ability of a business to meet its financial obligations in the medium and longer term. | The debt ratio is designed to indicate the ability of a business to meet its financial obligations in the medium and longer term. | ||
It is sometimes calculated as Total liabilities divided by Total assets. | It is sometimes calculated as: | ||
Total liabilities divided by Total assets. | |||
2. | 2. | ||
An alternative calculation of the debt ratio is Total debt divided by Total assets. | An alternative calculation of the debt ratio is: | ||
Total debt divided by Total assets. | |||
Here as elsewhere, consistency of definition and application is essential. | Here as elsewhere, consistency of definition and application is essential. | ||
| Line 14: | Line 19: | ||
== See also == | == See also == | ||
* [[Collateral]] | |||
* [[Covenant]] | |||
* [[Current ratio]] | * [[Current ratio]] | ||
* [[Gearing]] | * [[Gearing]] | ||
* [[Interest cover]] | * [[Interest cover]] | ||
* [[Long-term solvency ratio]] | * [[Long-term solvency ratio]] | ||
* [[Security]] | |||
[[Category:Accounting,_tax_and_regulation]] | [[Category:Accounting,_tax_and_regulation]] | ||
[[Category:The_business_context]] | [[Category:The_business_context]] | ||
Latest revision as of 01:39, 25 December 2021
1. Financial ratio analysis - long term solvency ratios.
The debt ratio is designed to indicate the ability of a business to meet its financial obligations in the medium and longer term.
It is sometimes calculated as:
Total liabilities divided by Total assets.
2.
An alternative calculation of the debt ratio is:
Total debt divided by Total assets.
Here as elsewhere, consistency of definition and application is essential.
