Debt Ratio Calculator
Calculate the debt ratio — total liabilities divided by total assets — with the equity ratio, debt-to-equity and equity multiplier, for a company or your personal balance sheet.
How it works
Debt ratio = total liabilities ÷ total assets · equity ratio = 1 − debt ratio · debt-to-equity = liabilities ÷ (assets − liabilities) · equity multiplier = assets ÷ equity
The debt ratio shows what share of everything a company (or household) owns is financed by creditors rather than owners. Lenders use it to judge solvency: the higher it is, the less cushion there is to absorb losses before creditors are hurt. As a rough guide, below 40% is conservative, 40%–60% is common, and above 60% is highly leveraged — but utilities, banks and real-estate firms normally run higher ratios than software or retail companies, so compare within the same industry.
Worked example
A company with 400,000 of total liabilities and 1,000,000 of total assets has a debt ratio of 400,000 ÷ 1,000,000 = 40.00% (0.40). Equity is 600,000, so the equity ratio is 60.00%, debt-to-equity is 400,000 ÷ 600,000 = 0.67 and the equity multiplier is 1,000,000 ÷ 600,000 = 1.67 — moderate leverage.
Sources: Investopedia — Debt ratio · Wikipedia — Debt ratio
Frequently asked questions
What is a good debt ratio?
Many analysts view 0.4 or lower as conservative and above 0.6 as high, but acceptable levels depend on the industry and on how stable the cash flows are.
What is the difference between the debt ratio and debt-to-equity?
The debt ratio divides liabilities by total assets; debt-to-equity divides them by equity. A 40% debt ratio equals a debt-to-equity of 0.67.
Should I use total liabilities or only interest-bearing debt?
The classic debt ratio uses total liabilities. Some lenders use only interest-bearing debt (loans and bonds); enter that figure instead if your lender does.
Can I use it for personal finances?
Yes. Divide everything you owe (mortgage, car loans, cards, student loans) by the value of everything you own. A ratio above 100% means negative net worth.
Related calculators
Educational estimate, not credit, accounting or investment advice. Lenders, auditors and rating agencies adjust these ratios with their own definitions — use the exact definitions in your loan agreement or reporting framework.