Debt/Asset Ratio

The debt/asset ratio looks at how much of a company’s assets are leveraged by debt. A lower ratio implies fewer assets are financed by debt.

The debt/asset ratio is often used by creditors to determine a company’s financial situation. This helps them determine if the company can repay the debt and how fast the debt can be repaid. Investors look at a company’s debt ratio to see if the company is financially solvent. Investors looking for less-risky stocks should look for companies with low debt ratios.