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
More from this Section
- Asset Turnover Ratio
The asset turnover ratio analyzes the productivity of a company’s assets. It tells us how many dollars of sales a company generates for each dollar invested in assets.
- Book value per share
Book value per share represents the equity a common stockholder has in the net assets of the corporation form owning one share of stock.
- Subsidiary ledger
A subsidiary ledger that collects transaction data of individual creditors. Companies use subsidiary ledgers to keep track of individual balances.
Liabilities are claims against assets-that is, existing debts and obligations. Businesses of all sizes usually borrow money and purchase merchandise on credit. Creditors may legally force...
- Purchase invoice
Purchase invoice refers to a document that supports each credit purchase. This invoice indicates the total purchase price and other relevant information.
- Extraordinary items
Extraordinary items are events and transactions that meet two conditions: They are (1) unusual in nature, and (2) infrequent in occurrence.
- Physical units
Physical units are the actual units to be accounted for during a period, irrespective of any work performed. To keep track of these units, add the units started...