**introduction **

Consider a business that navigates the broad ocean of commerce like a ship. Investors and analysts rely on financial statistics to analyze a company's financial health, much as a captain uses instruments to determine the stability of the ship. The debt-to-asset ratio (D/A ratio) is one such important measure.As a measure of leverage, the D/A ratio shows how much of an organization's assets are financed by debt. In other words, it shows the ratio of a company's equity—its own money—to its debt, which is the money it borrowed to buy those assets. A low debt-to-assets ratio (D/A ratio) denotes a cautious strategy in which the company holds a higher share of its assets, possibly signaling lower financial risk. On the other hand, a high D/A ratio denotes a high degree of debt dependence, which might be dangerous. particularly if cash flow declines or interest rates increase.

## what is the Debt-to-Asset Ratio?

A financial ratio that expresses how much leverage a corporation has is called a debt ratio. The ratio of total debt to total assets, stated as a percentage or decimal, is known as the debt ratio. It can be seen as the percentage of debt used to finance the assets of a company. A ratio larger than one indicates that a business has more liabilities than assets since many of its assets are financed by debt. If interest rates suddenly jump, a company with a high ratio may be at risk of failing on its loans. A ratio less than one indicates that equity funds a larger share of a company's assets.

## Debt to Asset Ratio formula?

Debt to asset ratio = (Total debt ) / (Total assets)

There is a brief difference. With the possible exception of some liabilities like accounts payable, the debt ratio only looks at a company's debt. A company's total liabilities include all of its debt. While both measurements offer insightful information, the debt-to-asset ratio is the more commonly used indicator for evaluating a company's financial leverage and debt serviceability.

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**Debt To Asset Ratio Example:**

Lets think you company has a total asset of 20,50,000 and total debt of 440,000. And you want to find the Debt to Asset Ratio for financial needs.

- The debt to asset ratio is calculated using the DTA formula, which is [Total debt ) / (Total assets)]
- Next, we calculate 440,000 / 20,50,000
- And 21.46% is the answer

Your Debt To Equity Ratio is 21.46% and Your Debt-to-Asset Ratio suggests a low financial risk. Keep up the good work!

## Debt to asset ratio interpretation!

A company has more debt than assets if its debt ratio is larger than 1.0, or 100%, and more assets than debt if its debt ratio is smaller than 100%. According to some sources, the debt ratio is calculated by dividing total liabilities by total assets.

**Total debt **: Long-term debt (which will be repaid over a longer period of time) and short-term debt (which is due within a year) are both included in a company's total debt. Liabilities are not included in total debt in corporate finance. Although they are an essential component of running a business, short-term obligations like employee pay and long-term obligations like pension plans are not considered debt.

**Total assets: **The total assets of a business consist of both intangible assets (copyrights, patents, and goodwill) and tangible assets (equipment, merchandise, cash on hand, and total liabilities to be paid by borrowers).

**Debt to asset ratio : **After gathering all of these data, enter it into the debt-to-assets ratio formula: Total Debt / Total Assets is the debt-to-asset ratio.

**Note - use Jordensky Debt to asset ratio calculator for the best result and tip**