Definition Of

Debt to total assets ratio

The debt to total assets ratio measures the percentage of the total assets that creditors provide; computed by dividing total debt (both current and log-term liabilities ) by total assets. This ratio indicates the company’s degree of leverage. It also provides some indication of the company’s ability to withstand losses without impairing the interests of creditors. The higher the percentage of debt to total assets, the greater the risk that the company may be unable to meet its maturing obligations.

  Debt to total assets ratio = Total Debt ÷ Total Assets

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