Account Info
Log Out

What is the Debt Ratio?

Views 14KAug 9, 2023

Key Takeaways

● A company's debt ratio is the ratio of its total debt to total assets.

● Corporate debt can be classified into long-term debt and short-term debt, or current liabilities.

● The debt ratio measures a company's leverage and risks.

Understanding

The debt ratio divides a company's total assets by its total liabilities.

It represents the proportion of the company's assets financed with debt. The ratio shows the company's ability to raise capital from creditors.

Calculation

The formula for a company's debt ratio is:

Debt ratio = Total debt / Total assets

Total debt includes long-term and short-term debt, also known as current liabilities.

Total assets can be categorized into current assets, fixed assets, long-term investments, intangible assets, deferred assets, and more.

How to use the debt ratio

Investors can determine the overall risk of a company with this ratio.

Generally, a company with a 40-60% debt ratio is considered moderately leveraged.

Companies that face higher uncertainty in operation should lower their debt ratio to improve their financial health.

Yet, companies with robust performance may consider raising the debt ratio to add more value to their shareholders.

This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance. You should consider the appropriateness of this information having regard to your relevant personal circumstances before making any investment decisions. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal. Moomoo makes no representation or warranty as to its adequacy, completeness, accuracy or timeline for any particular purpose of the above content.

Moomoo is a financial information and trading app offered by Moomoo Technologies Inc.

In the U.S., investment products and services available through the moomoo app are offered by Moomoo Financial Inc., a broker-dealer registered with the U.S. Securities and Exchange Commission (SEC) and a member of Financial Industry Regulatory Authority (FINRA)/Securities Investor Protection Corporation (SIPC).

In Singapore, investment products and services available through the moomoo app are offered through Moomoo Financial Singapore Pte. Ltd. regulated by the Monetary Authority of Singapore (MAS). Moomoo Financial Singapore Pte. Ltd. is a Capital Markets Services Licence (License No. CMS101000) holder with the Exempt Financial Adviser Status. This advertisement has not been reviewed by the Monetary Authority of Singapore.

In Australia, financial products and services available through the moomoo app are provided by Futu Securities (Australia) Ltd, an Australian Financial Services Licensee (AFSL No. 224663) regulated by the Australian Securities and Investment Commission (ASIC). Please read and understand our Financial Services Guide, Terms and Conditions, Privacy Policy and other disclosure documents which are available on our website  https://www.moomoo.com/au .

In Canada, order-execution only services available through the moomoo app are provided by Moomoo Financial Canada Inc., regulated by the Canadian Investment Regulatory Organization (CIRO).

In Malaysia, investment products and services available through the moomoo app are offered through Futu Malaysia Sdn. Bhd. ("Moomoo MY")regulated by the Securities Commission of Malaysia (SC). Futu Malaysia Sdn. Bhd. is a Capital Markets Services Licence (License No. eCMSL/A0397/2024) holder. This advertisement has not been reviewed by the SC.

Moomoo Technologies Inc., Moomoo Financial Inc., Moomoo Financial Singapore Pte. Ltd.,Futu Securities (Australia) Ltd, Moomoo Financial Canada Inc., and Futu Malaysia Sdn. Bhd. are affiliated companies.

Recommended