a company has more debt than assets. If the ratio is below 1, the company has more assets than debt. Broadly speaking, ratios of 60% (0.6) or more are considered high, while ratios of 40% (0.4) or less are considered low.
There are also several downsides to the debt ratio as well. The debt ratio doesn't reveal the type of debt or how much it will cost. The periods and interest rates of various debts may differ, which can have a substantial effect on a company's financial stability. In addition, the debt...
The debt ratio is also known as thedebt to asset ratioor thetotaldebt to total assets ratio. Hence, the formula for the debt ratio is: total liabilities divided by total assets. The debt ratio indicates the percentage of the total asset amounts (as reported on thebalance sheet) that is ...
The debt-to-capital ratio can help you understand how businesses finance their daily operations. Learn more about the debt-to-capital ratio formula.
The debt-to-GDP ratio is a formula that compares a country's total debt to its economic productivity. To get the debt-to-GDP ratio, divide a nation's debt by its gross domestic product. When a country has a manageable debt-to-GDP ratio, investors are more eager to invest, and it do...
The debt service coverage ratio (DSCR) formula is a way to measure a company's financial strength. It is a quick and easy test that capital providers such as banks, bondholders, and investors use to judge whether or not they should lend money to a business. The DSCR measures the cash ...
The formula that's used to calculate the gross debt service ratio is fairly straightforward. It looks like this: Gross Debt Service Ratio = Principal + Interest + Taxes + Utilities / Gross Annual Income Utilities can include any amounts paid toward electric, water, or natural gas service. If...
of the creditor are. On the contrary, it shows that the enterprise has too much debt and the financial structure is not sound enough. Once the recession happens, enterprises will have difficulty in paying debts and the interests of creditors will be less protected. The ratio formula is: ...
Earnings Per Share | EPS Definition, Formula & Calculation 4:32 Price to Earnings Ratio | Meaning, Formula & Analysis 4:06 The Debt to Equity Ratio: Definition, Calculation, & Usefulness 5:22 5:10 Next Lesson The Return on Equity Ratio: Formula, Calculation & Analysis Ch 14. Study...
The debt turnover ratio, also known as the receivable turnover ratio, is an evaluation of how efficiently your business collects payments on account. The initial formula for debt turnover is annual credit sales divided by the average accounts receivable balance during the year. Formula Example ...