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:  Cite

More from this Section

  • Direct labor quantity standard
    The direct labor quantity standard is the time that should be required to make one unit of the product. This standard is especially critical in labor-intensive companies.
  • Forensic accounting
    Forensic accounting is an area of accounting that uses accounting, auditing, and investigative skills to conduct investigations into theft and fraud.
  • Depreciation
    Depreciation is the process of allocating to expense the cost of a plant asset over its useful (service) life in a rational and systematic manner. It is a process of cost allocation...
  • Sales journal
    Sales journal is a special journal that records all sales of merchandise on account. Cash sales of merchandise go in the cash receipts journal. Credit sales of assets...
  • Selling and administrative expense budget
    Selling and administrative expense budget is a projection of anticipated selling and administrative expenses for the budget period.
  • Auditing in depth
    The Institute of Chartered Accountants of England issued a Statement on the General Principles of Auditing on 16th August, 1961, which
  • Enterprise resource planning (ERP) systems
    Enterprise resource planning (ERP) systems are typically used by manufacturing companies with more than 500 employees and $500 million in sales.