What ratio is total liabilities divided by total assets?

What ratio is total liabilities divided by total assets? The debt ratio measures the share of a company’s assets financed by liabilities or debt.

The formula is total liabilities divided by total assets, often presented as a decimal or percentage. A result of 0.60 means liabilities account for 60% of the assets shown on the balance sheet. The measure helps analysts assess creditor dependence, financial leverage, and the cushion provided by shareholders’ equity.

Terminology varies. Some definitions use total debt—primarily interest-bearing borrowings—instead of every liability. Under the broader accounting convention, total liabilities and total assets are used, making the stored answer the standard debt-ratio formulation. The related equity ratio divides equity by assets; when liabilities and equity are the only financing sources, the two are complementary.

A high debt ratio can imply greater financial risk, especially when earnings or cash flow are insufficient to meet obligations. It is not automatically unhealthy: infrastructure, utilities, and banks may operate with much more leverage than lightly financed businesses. Comparisons are most useful among companies with similar business models and accounting practices.