Debt Ratio Calculator
The Debt Ratio (Total Debt to Total Assets) measures the proportion of a company’s asset base financed through debt liabilities. A ratio greater than 0.50 (50%) indicates that more than half of the assets are funded by creditors.
Sensitivity Analysis
Evaluate how variations in key operational drivers impact Debt Ratio (Debt-to-Assets).
| Sensitivity Case | Assumption Shift | Driver Value | Debt Ratio (Debt-to-Assets) | Impact vs Base |
|---|
Formula & Methodology
Debt Ratio (%) = (Total Debt / Total Assets) * 100Total DebtAll short-term and long-term liabilities.
Total AssetsSum of all balance sheet assets.
Practical Worked Example
Horizon Holdings has $4,500,000 in total assets and $1,800,000 in liabilities.
Interpretation & Industry Benchmarks
A debt ratio below 50% indicates the company owns more than it owes. A ratio above 100% indicates negative equity / technical insolvency.
Majority equity cushion.
Standard leverage for capital-efficient firms.
High creditor claim on assets.
Extreme vulnerability to creditor restructuring.
Industry Nuance: Regulated banks operate with debt-to-asset ratios of 88–92% by nature of deposit liabilities.
Analytical Limitations
- Does not indicate interest burden or cash flow generation ability.
Frequently Asked Questions
What is the difference between Debt Ratio and Debt-to-Equity Ratio?
Debt Ratio divides debt by Total Assets (measuring debt as % of assets), while Debt-to-Equity divides debt by Shareholders Equity (measuring debt multiple against equity).