Answer:
The equation Total liabilities ÷ Total assets represents the <em>Total-Debt-to-Total-Assests.</em>
Explanation:
The Total-Debt-to-Total-Assests serves to establish a metric of the degree of indebtedness of a company in relation to the total of its assets.
When a company wants to finance its activity, it can choose one of two options:
1) Finance its activity with its own funds (share capital, reserves, donations, grants, adjustments for value change, dividends) or
2) Finance its activity through creditors (A creditor is a person, physical or legal, who has given a credit or material good to another person (debtor) and expects to receive payment in return).
Each company seeks its capital structure taking into account its needs and market conditions. The Total-Debt-to-Total-Assests ratio will allow us to know what proportion of the company's activity (total assets) is financed by its creditors (total liabilities).
