Ratio Analysis Fundamentals: How 17 Financial Ratios Can Allow You to Analyse Any Business on the Planet by Axel Tracy

Author:Axel Tracy
Language: eng
Format: epub
Tags: finance, investing, stocks, accounting, investments, stock market, financial analysis, financial statements, investing 101, ratio analysis

The Formula:

Debt Ratio = Liabilities / Assets

Example from given Financial Statements:

Debt Ratio

= $2,928,000 / $12,893,940

= 22.71%

Where do we find the information for this ratio?

Assets: In the Balance Sheet

Liabilities: In the Balance Sheet

What the result means:

As mentioned, the result is expressed as a percentage. If you have a result of 65%, this means 65% of your assets are financed by debt, or put another way, for every $1 of assets there are 65 cents of debt.

Perhaps in the simplest terms, a 65% Debt Ratio means the value of debt is 65% of the value of assets.

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