financial ratio
A financial ratio or accounting ratio states the relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall fin ...
which indicates the percentage of a company's
assets
In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can b ...
which are funded by
debt
Debt is an obligation that requires one party, the debtor, to pay money Loan, borrowed or otherwise withheld from another party, the creditor. Debt may be owed by a sovereign state or country, local government, company, or an individual. Co ...
.Drake, P. P., Financial ratio analysis, p. 9, published on 15 December 2012 It is measured as the ratio of total debt to total assets, which is also equal to the ratio of total liabilities and total assets:
:
Financial analyst
A financial analyst is a professional undertaking financial analysis for external or internal clients as a core feature of the job.
financial managers use the ratio in assessing the financial position of the firm. Companies with high debt to asset ratios are said to be highly leveraged, and are associated with greater risk. A high debt to asset ratio may also indicate a low borrowing capacity, which in turn will limit the firm's financial flexibility.
See also
*
Equity ratio
Equity may refer to:
Finance, accounting and ownership
*Equity (finance), ownership of assets that have liabilities attached to them
** Stock, equity based on original contributions of cash or other value to a business
** Home equity, the diff ...
Debt-to-GDP ratio
In economics, the debt-to-GDP ratio is the ratio of a country's accumulation of government debt (measured in units of currency) to its gross domestic product (GDP) (measured in units of currency per year). A low debt-to-GDP ratio indicates that an ...
*''Corporate Finance: European Edition'', by D. Hillier, S. Ross, R. Westerfield, J. Jaffe, and B. Jordan. McGraw-Hill, 1st Edition, 2010.
Financial ratios
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