outnumber its debt The debt ratio, when combined with other financial health indicators, can assist investors in determining a companys risk level Some sources consider the debt ratio to be total lia.
outnumber its debt The debt ratio, when combined with other financial health indicators, can assist investors in determining a company's risk level Some sources consider the debt ratio to be total liabilities divided by total assets This reflects a certain ambiguity between the terms debt and liabilities that depends on the circumstance The debt-to-equity ratio, for example, is closely related to and more common than the debt ratio, instead, using total liabilities as the numerator It is calculated using just long-term and short-term debt (including current components of long-term debt), omitting liabilities such as accounts payable, negative goodwill, and others, according to financial data sources The gross debt service ratio and the total debt service ratio are two popular debt ratios used in consumer lending and mortgages to measure a borrower's capacity to repay a loan or mortgage The gross debt ratio is the proportion of monthly housing costs (including mortgage payments, home insurance, and property costs) to monthly income, whereas the total debt service ratio is the proportion of monthly housing costs plus other debt (such as car payments and credit card debt) to monthly income In percentage terms, acceptable overall debt service ratios vary from the mid-30s to the low-40s There are server ways to evaluate a Debt Ratio: • Common Debt Ratios: All debt ratios examine a company's debt situation compared to its assets Debt-to-equity, debt-to-assets, long-term debt-to-assets, leverage, and gearing ratios are all common debt ratios • Healthy Debt Ratios: What constitutes a good debt ratio will vary according to the nature of the company and its industry A debt-to-equity or debt-to-assets ratio of less than 1.0 is regarded reasonably secure, however ratios of 2.0 or above are deemed dangerous Banking, for example, is recognized for having substantially greater debt-to-equity ratios than other businesses