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Quick Definition

Measures debt in relation to assets in an attempt to gauge the amount of risk.

There's More to Financial Analysis Than You Think...

The Financial Analysis Success Kit can help!

Why you should take a look at the Financial Analysis Success Kit:

We've combined all our highly popular financial analysis tools into one mega-financial-analysis-kit that will save you hundreds of dollars if purchased separately. The kit contains 9 files packed with the most important financial ratio analysis tools you can find to help rocket your way to mastering financial analysis. The kit includes:

  1. The eBook "Learn Ratio Analysis In Minutes"

  2. The Learn Financial Ratio Analysis Excel Spreadsheet (2 versions!)

  3. A BONUS eBook..."Key Financial Statement Terms"

  4. Another HUGE BONUS...Five-Part Financial Ratio Cheat Sheet Series

The result? You get all these professionally created tools for a great low price.

Learn more on our product page:

Click the button to learn more about the Financial Analysis Success Kit

 

financial ratio analysis success kit

Click the button to learn more about the Financial Analysis Success Kit

Debt to Asset Ratio Formula

Explanation of Debt to Asset Ratio

The Debt to Asset Ratio measures the percentage of the company’s Total Assets that are financed with debt (Total Liabilities). This ratio basically looks at what debt the company owes, and compares that debt to what assets the company owns.

Importance of Debt to Asset Ratio

The lower the Debt to Asset Ratio, the better, as companies with high amounts of debt introduce more risk. You certainly want to look very hard at companies that have more Total Liabilities than Total Assets, as this is a precarious position for a company to be in.

Depending on the industry of the company, you might expect the company to have two or three times as many assets as liabilities. Anything less than this might be a signal that the company is running into trouble.