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 = 160/300 = 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.
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Calculator for Debt Ratio
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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.