This debt to asset ratio template will show how to calculate the Debt/Asset ratio given the amount of assets, short-term and long-term debt.
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The Debt to Asset Ratio, also known as the debt ratio, is a leverage ratio that indicates the percentage of assets that are being financed with debt. The higher the ratio, the greater the degree of leverage and financial risk.
The debt to asset ratio is commonly used by creditors to determine the amount of debt in a company, the ability to repay its debt, and whether additional loans will be extended to the company. On the other hand, investors use the ratio to make sure the company is solvent, is able to meet current and future obligations, and can generate a return on their investment.
The formula for the debt to asset ratio is as follows:
debt/asset = (short-term debt + long-term debt) / total assets
Where: Total assets may include all current and non-current assets on the company’s balance sheet, or may only include certain assets such as Property, Plant & Equipment, at the analyst’s discretion.
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