1. What is Debt to Assets Ratio?

The Debt to Assets ratio is a financial metric that indicates what proportion of a company's assets is financed through debt. It shows the percentage of assets that are being financed by creditors.

2. How Does the Calculator Work?

The calculator uses the Debt to Assets formula:

Where:

• \( \text{Total Debt} \) — All outstanding debts and obligations (USD)
• \( \text{Total Assets} \) — Everything the company owns (USD)

Explanation: The ratio measures financial leverage and indicates what percentage of assets is financed by debt versus equity.

3. Importance of Debt to Assets Ratio

Details: This ratio is crucial for assessing a company's financial health and risk level. A higher ratio indicates more leverage and higher financial risk.

4. Using the Calculator

Tips: Enter total debt and total assets in USD. Both values must be positive numbers, and total assets cannot be zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Debt to Assets ratio?
A: Generally, a ratio below 0.5 is considered good, meaning less than half of assets are financed by debt. However, this varies by industry.

Q2: How is this different from Debt to Equity ratio?
A: Debt to Assets compares debt to total assets, while Debt to Equity compares debt to shareholders' equity.

Q3: What does a ratio of 1 mean?
A: A ratio of 1 means all assets are financed by debt, with no equity. This is extremely risky.

Q4: Can the ratio be greater than 1?
A: Yes, this means the company has more debt than assets, indicating negative equity and high financial risk.

Q5: How often should this ratio be calculated?
A: It should be calculated regularly (quarterly or annually) as part of financial statement analysis.