What does Debt To Assets mean?
This is a metric used to measure a company's financial risk by determining how much of the company's assets have been financed by debt. It is calculated by adding short-term and long-term debt and then dividing by the company's total assets. For example, a company with £2 million in total assets and £500,000 in total liabilities would have a debt ratio of 25%.
Stockopedia explains Debt To Assets...
The higher the ratio, the greater risk will be associated with the firm's operation. In addition, high debt to assets ratio may indicate low borrowing capacity of a firm, which in turn will lower the firm's financial flexibility. Like all financial ratios, a company's debt ratio should be compared with their industry average or other competing firms.
Companies with high debt/asset ratios are said to be "highly leveraged". A company with a high debt ratio could be in danger if creditors start to demand repayment of debt.
