The debt to asset ratio is a type of leverage financial ratios that measure the proportion of a company's assets financed with debt. The formula for calculating the debt to asset ratio is as follows:
Debt/Asset Ratio = (Short-term Debt + Long-term Debt) / Total Assets
The debt/asset ratio is a common metric used by creditors to assess a company's ability to repay its debt and whether they should issue additional loans to the company based on its leverage. The higher the ratio, the greater the degree of leverage and financial risk for the business. It is also a good ratio for investors to see how solvent a company is, its ability to meet its current and future obligations, and the ability to generate a return on investment.