Ratio Analysis
Debt-Asset Ratio
= |
Total Liabilities |
|
Total Assets |
Indicates what proportion
of the company's assets are being financed through debt.
| Things to remember |
- This ratio is very similar to
the debt-equity ratio.
- A ratio under 1 means a majority
of assets are financed through equity, above 1 means
they are financed more by debt. Furthermore you can
interpret a high ratio as a "highly debt leveraged
firm".
|
[Click
on the button above to see the financial statement] |
| For Cory's Tequila Co. |
$3,003 |
=
0.20 |
$14,725 |
Debt/Asset Analysis:
Not a particularly exciting ratio, but a useful one. Cory's Tequila Co.'s debt/asset ratio is fairly low, meaning that its
assets are financed more through equity rather than debt. Also, Cory's Tequila Co. has no long term debt
and shouldn't have to worry about creditors getting nervous.
Companies with high ratios are placing themselves at risk, especially
in an increasing interest rate market. Creditors are bound to
get worried if the company is exposed to a large amount of debt
and may demand that the company pay some of it back.
|
Previous
