Debt to Asset Ratio

A printable cheatsheet with calculations
and notes

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Debt to Asset Ratio

Debt Ratio =

Total Liabilities

Total Assets

INTERPRETATION

Measures a company’s total liabilities as a percentage of its total assets.

Business owners, managers, and other interested parties use it to determine the proportion of a company’s assets financed through debt. And to assess whether a company can handle its debt burden.

Note: expanded calculation

Divide total liabilities by total assets

EXAMPLE

M&M reported total assets of $100,000 and total liabilities of $25,000.

Debt to Asset Ratio = $25,000 / $100,000 = 0.25

This means that M&M has $0.25 in debt for every dollar of assets and is considered stable and low-risk.

(1/.25=4) meaning M&M has four times as many assets as liabilities.

BENCHMARK: HA, PG, EB, ROT

A lower ratio is more favorable than a higher ratio. Each industry has its benchmarks for debt, but .5 is a reasonable ratio (less risky).

Debt to Asset Ratio :

ABBREVIATION KEY:

ROT: Rule of thumb
HA: Historical Average (organization’s historical average)
PG: Peer Group average
EB: Economic Benchmark

DISCLAIMER: The interactive calculators on this site are self-help tools intended to help you visualize and explore your financial information. They are not intended to replace the advice of a qualified professional. Because each business is different, we can not guarantee accuracy.