Debt Ratio

The debt ratio is calculated by dividing a company's total liabilities by its total assets. Alternatively, you can calculate the debt ratio by dividing the company's short-term and long-term debt by its total assets. Whichever method is used, the debt ratio tells you the proportion (or percentage, if you multiply the debt ratio by 100) of the company's assets that are financed by debt. A higher debt ratio implies that the company is highly leveraged.—
Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education freely available to the world.
—
SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS:
• A 23-PAGE GUIDE TO MANAGERIAL ACCOUNTING
• A 44-PAGE GUIDE TO U.S. TAXATION
• A 75-PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS
• MANY MORE FREE PDF GUIDES AND SPREADSHEETS
—
SUPPORT EDSPIRA ON PATREON
—
GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT
—
LISTEN TO THE SCHEME PODCAST
—
GET TAX TIPS ON TIKTOK
—
ACCESS INDEX OF VIDEOS
—
CONNECT WITH EDSPIRA
—
CONNECT WITH MICHAEL
—
ABOUT EDSPIRA AND ITS CREATOR

[jordankopal]

Your videos helped me to understand how to keep my equations balanced. Hopefully, I can do well on my midterm. (2024)

[Bauks]

Using "Twitter" as a sample case aged like fine wine. :D

[tiffanycore]

Oh my god you're a life saver ❤️
I have a report later and this made me understand a lot. Thank you so much ❤️❤️❤️❤️

[ahmedtawfiq]

This is really outstanding explanation ❤️👏🏼

[kairoman]

Mesej yang jelas, struktur yang jelas, mudah difahami, terima kasih

[geri]

Thank you. Debt surface ratio would be interesting also considering that total debt is different from long term debt or short term debt.

[NinaLopez-ssoj]

Thank you so much for this video. Very interesting.

[thuynportalios]

Great explanations. In the video, you mentioned that the numerator can include just borrowings from the bank or any amount of debt that incurs interest expenses (short-term/long-term debt). If so, we can exclude accounts payable or unearned revenue which is a liability but is not considered debt because there is no interest expense involved? And which formula is used more popularly in general: total liabilities or only debts that carry interests used as the numerator? Thanks.

[god-la-wins-verdad-]

So the lower the % the better it is that a company can pay off its debt and less stressful for the company to go bankrupt and depreciated okay! Thanks

[ivornworrell]

*Hello, is there a Debt Ratio that is gen. regarded as satisfactory, say a 50% Debt Ratio or 65% Debt Ratio as the case may be, because It follows that the higher the Debt Ratio beyond a certain percentage, the more difficult it will be for a business/person to obtain financing from a bank or finance Co., the converse being equally true.Also, is the Debt Ratio similar to the GDP (Gross Domestic Product) Ratio, but the term GDP is used for countries/islands/nations? Thank you.*

[JosephDaoudaSENE]

did he say unearned revenue is not a debt? so not to include it in liabilities?

[valeaguilarespinoza]

You try to give the video more brightness it will be great if you do

[Kyle_Hubbard]

I'm fucking retarded, I like that the video is broken down simply but I just don't understand it if I'm being honest. I've been trying to find out what Debt ratio is because I stumbled over a website that was showing statistics of a company that I was looking up, don't know why this other website came up.

Regardless it says,

Total Assets £275.6m
+£69.26m (+33.56%)
vs previous year

Net Assets £118.5m
+£40.01m (+50.97%)
vs previous year

Debt Ratio (%) 57%
-4.96 (-8.01%)
vs previous year

I saw "Debt Ratio" and wondered what it is. I've heard of the word "Debt" I've only ever known it to used for when something is owed, so when it said 57% I was confused. I, being honest don't really entirely know how money or financials work. I need to learn at some point so when I move out I have at least some idea on what the fuck I'm doing. That said, I'm lost at sea on this concept.