How this calculator works
The debt to asset ratio divides debts by total assets. It answers a simple solvency question: for every dollar of assets, how much was supplied by lenders? A company with a ratio of 0.40 has 40 cents of debt for each dollar of assets and 60 cents of equity. Use balance-sheet debt rather than every liability when you want a financing measure, and keep the definition consistent from year to year. The ratio can exceed 1 when accumulated losses have pushed equity below zero, which is a warning sign rather than a normal result.
Formula
Debt to assets = total debt / total assets. Total debt = long-term debt + short-term debt when the split is used. Equity share = 1 - debt to assets ratio. Multiply the ratio by 100 to read it as a percentage.
Worked example
A company has $300,000 of long-term debt and $100,000 of short-term debt against $1,000,000 of assets. Total debt is $400,000, so the debt to asset ratio is 0.40 and debt is 40% of assets. The equity share is the remaining 60%.
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Frequently asked questions
Does total debt include accounts payable?
It depends on the purpose. A financing ratio usually counts interest-bearing borrowings, while a broader solvency ratio may count all liabilities. This page counts the debt figures you enter, so choose a consistent definition.
Is a low ratio always better?
Usually it means less financial risk, but a company may borrow cheaply to fund profitable growth. Compare the ratio with peers in the same industry, because capital structures differ widely.
What does a ratio above 1 mean?
Liabilities exceed assets on a book basis, so shareholders' equity is negative. That can happen after large losses and makes further borrowing harder and more expensive.