The
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

Share it:

More from this Section

  • FOB shipping point & FOB destination
    FOB shipping point means that the seller places the goods free on board the carrier, and the buyer pays the freight costs. FOB destination means that the seller places the goods...
  • Internal process perspective
    Internal process perspective is a viewpoint employed in the balanced scorecard to evaluate the effectiveness and efficiency of a company’s value chain...
  • Accounting information system
    Accounting information system is a system that collects and process transaction data and communicates financial information to decision makers.
  • T account
    T account is the basic form of an account. The T account is a standard shorthand in accounting, which helps make clear the effects of transactions on individual accounts.
  • Profit center
    A profit center refers to a responsibility that incurs costs (and expenses) and also generates revenues. Managers of profit centers are judged on the profitability of their centers.
  • Classification of cash flows
    The statement of cash flows classifies cash receipts and cash payments as operating, investing, and financing activities. Transactions and other events characteristic...
  • Useful life
    Useful life is an estimate of the expected productive life, also called service life, of the asset. Useful life may be expressed in terms of time, units of activity...