The debt ratio is the ratio of total debts to total sales. It shows if a business will be able to pay off its liabilities with its assets. The debt ratio can be calculated using the below formula:
Debt Ratio = Total Debts / Total Assets
A debt ratio of 1.0 denotes that a company has more debts than assets, whereas a ratio of less than 1.0 denotes that it has more assets than debts.
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