What is D/A?
The percentage of a company's assets that are financed by debt rather than equity.
Think of it like this
Like knowing what percentage of your house is owned by the bank vs. your own equity.
Formula
Debt/Assets = Total Debt ÷ Total Assets × 100- Total Debt: All short-term and long-term debt
- Total Assets: Everything the company owns
Why it matters
- Shows overall leverage level
- Higher ratio = more financial risk
- Affects credit ratings and borrowing costs
- Important for assessing bankruptcy risk
What's a good value?
< 30%
Conservative
Low leverage, strong balance sheet
30-50%
Moderate
Balanced capital structure
50-70%
Aggressive
Higher leverage, watch interest costs
> 70%
High Risk
Significant financial risk
Real-world example
Utilities often have 60-70% debt/assets due to stable cash flows supporting debt service.
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