Debt Ratio Calculator

Calculate your debt-to-income ratio and understand your financial health

Monthly Income

Gross Monthly Income

Other Monthly Income

Monthly Debt Payments

Mortgage/Rent

Auto Loans

Student Loans

Credit Card Payments

Other Monthly Debts

Debt Analysis

Debt-to-Income Ratio

0%

Percentage of income going toward debt payments

Low Risk (<36%) Moderate Risk (36-43%) High Risk (>43%)

Total Monthly Income

$0.00

Your combined monthly income

Total Monthly Debt

$0.00

Your combined monthly debt payments

Debt Composition

Debt Breakdown

Debt Type	Monthly Payment	% of Total Debt

This calculator provides estimates based on your inputs. For financial advice, consult a professional. Print Results

What is a Debt Ratio?

The Debt Ratio is a financial metric that measures the proportion of a company's total debt relative to its total assets. It indicates how much of a company's assets are financed by debt, providing insights into financial leverage and solvency.

• Formula:

  $$\text{Debt Ratio}=\frac{\text{Total Debt}}{\text{Total Assets}}$$

• Interpretation:

  • Below 0.5 (50%): Indicates that more assets are financed by equity than debt (considered low risk).

  • Above 0.5 (50%): Suggests higher reliance on debt financing (higher financial risk).

  • 1.0 (100%) or higher: Means all assets are financed by debt, indicating potential solvency issues.

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What is a Debt Ratio Calculator?

A Debt Ratio Calculator is a tool that automates the calculation of the debt ratio by inputting total debt and total assets. It helps businesses, investors, and financial analysts quickly assess a company's leverage and financial health.

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How to Use a Debt Ratio Calculator?

1. Enter Total Debt: Input all liabilities (short-term + long-term debt).

2. Enter Total Assets: Input the sum of all assets (current + non-current).

3. Calculate: The tool computes the ratio automatically.

Example Calculation

Input	Amount ($)
Total Debt	500,000
Total Assets	1,000,000

$$\text{Debt Ratio}=\frac{500,000}{1,000,000}=0.5\text{ or }50\mathrm{\%}$$

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Why is the Debt Ratio Important?

1. Assesses Financial Risk – A high ratio indicates higher bankruptcy risk.

2. Evaluates Creditworthiness – Lenders use it to determine loan eligibility.

3. Compares Companies – Helps investors compare leverage across firms.

4. Tracks Financial Health Over Time – Monitors whether debt levels are sustainable.

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Limitations of the Debt Ratio

• Doesn’t Differentiate Debt Types – Short-term vs. long-term debt impacts liquidity differently.

• Industry Variations – Acceptable ratios vary by sector (e.g., utilities have higher ratios than tech firms).

• Ignores Cash Flows – A company with strong cash flow can manage higher debt.

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Debt Ratio vs. Other Financial Ratios

Ratio	Formula	Purpose
Debt-to-Equity	Total Debt / Total Equity	Measures debt relative to equity
Interest Coverage	EBIT / Interest Expense	Assesses ability to pay interest
Current Ratio	Current Assets / Current Liabilities	Evaluates short-term liquidity