The debt ratio is also known as the debt to asset ratio or the total debt to total assets ratio.

The calculation of the debt ratio is: Total Liabilities divided by Total Assets.

The debt ratio indicates the percentage of the total asset amounts stated on the balance sheet that is owed to creditors.

A high debt ratio indicates that a corporation has a high level of financial leverage.

Learn more about Financial Ratios.

Take our Financial Ratios Exam.

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the creator of the AccountingCoach Pro which has been praised for its ability to simplify accounting in a way that anybody can understand.

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