The proportion of assets that are financed with debt can be calculated using the <u>debt </u>ratio.
The phrase "debt ratio" refers to a financial ratio that assesses how much leverage a business has. The ratio of total debt to total assets, represented as a decimal or percentage, is known as the debt ratio.
The percentage of a company's assets that are financed by debt is one way to understand it.
An asset-to-asset ratio greater than 1 indicates that a significant portion of a firm's assets are financed by debt, which indicates that the corporation has more liabilities than assets.
If interest rates abruptly increase, a company with a high ratio may be at risk of loan default. A ratio lower than 1 indicates that equity funds a larger proportion of a company's assets.
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