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🏗️Solvency Ratios

Debt Ratio

Total Liabilities ÷ Total Assets × 100 = Debt Ratio %

What It Means

What percentage of assets are financed by debt?

✓Lower % = less financial risk (industry-dependent)

Example

Total Liabilities:$300,000
Total Assets:$500,000

$300,000 ÷ $500,000 × 100

Debt Ratio = 60%

→ 60% of assets are financed by debt

Related Formulas

Debt-to-Equity Ratio

Total Liabilities ÷ Total Equity = Debt-to-Equity Ratio

Times Interest Earned

Income Before Interest & Taxes ÷ Interest Expense = Times Interest Earned

Equity Multiplier

Total Assets ÷ Total Equity = Equity Multiplier

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