This glossary uses Visual Finance™ to bring financial terms to life. Each example shows data from the Round Number Company, a fictional business with simplified figures to make learning easier. For more details, visit 'How to Read Visual Finance'.
The debt ratio measures the extent of a company's leverage.
Debt Ratio: Total Liabilities/Total Assets
Example: The Round Number CompanyTotal Assets = 300; Total Liabilities = 160 Debt Ratio = 140/300 = 0.47 |
Utilities and manufacturing are 'capital-intensive industries', they are more likely to have higher debt ratios .
Service companies are generally less capital-intensive and will have lower debt ratios.
See the discussion at Leverage.
The above is our generic explanations of common corporate financial terminology. Actual meanings can vary widely from company to company; in order to have the correct internal definition you need to ask your Finance Department, "What do you mean by that?"
term list.