Debt Ratio

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.