A debt ratio is a financial metric that measures the amount of debt a company has relative to its assets or equity. It is calculated by dividing the total debt of a company by its total assets or equity. A high debt ratio indicates that a company has a lot of debt relative to its assets or equity, which can be risky. A low debt ratio, on the other hand, indicates that a company has relatively little debt, which can be less risky.
Debt ratios are important because they can help investors, creditors, and other stakeholders assess a company’s financial health. They can also be used to track a company’s progress over time and to compare it to other companies in the same industry.