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What ratios can be used to determine the debt load's impact on the financial health of the business?
The calculation of a debt/asset ratio can be done through a simple formula. [ According to Stock Research Pro, the formula for debt/ratio asset can be written as "debt-to-assets ratio=Total debt/total assets." The number is represented, then, as a percentage. For example, a 25 percent ratio would mean that the company's debt is minimal compared to a company with, say, a 75 percent ratioAccording to Solution Matrix, the debt-to-asset ratio of a company often determines how much funding a company can obtain from a lender and whether or not potential investors will pump funds into their
company. High debt/asset ratios are warning signs for many investors who will think twice about lending money or investing equity to a company who may have trouble paying their debts due to high debt leverage. When analyzing a company's debt load, according to Stock Research Pro, it is necessary to compare their debt ratio against others in their industry. Some industries naturally require a higher debt/asset ratio and, when making investment decisions, a comparison should be made against industry standards. Read more: Ideal Debt-to-Asset Ratio | eHow.com ]
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Expert answered|selymi|Points 8942|
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Asked 9/30/2012 11:53:52 AM
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