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Total-Debt-to-Total-Assets is a financial ratio that measures the total amount of a company’s debt compared to its total assets. It gives an understanding of the company’s financial leverage, showing the percentage of assets financed by debt. Higher ratios indicate higher risk while lower ratios indicate lower risk.


The phonetics of the keyword ‘Total-Debt-to-Total-Assets’ would be: ‘TOH-tuhl-debt-too-TOH-tuhl-AS-ets’

Key Takeaways

<ol> <li>Total-Debt-to-Total-Assets is a financial ratio that measures the financial risk of a company by comparing its total debt to its total assets. A higher ratio indicates a higher probability of bankruptcy if the company’s profits are not sufficient to service its debt.</li> <li>The ratio is often used by investors and analysts to understand the financial stability of a company. It is an essential component of financial analysis and often forms part of comprehensive financial modeling.</li> <li>The optimal level of this ratio varies by industry and by the nature of a company’s assets and liabilities. However, companies typically aim to maintain a low Total-Debt-to-Total-Assets ratio because a lower ratio is usually associated with lower risk.</li></ol>


The Total-Debt-to-Total-Assets ratio is a critical financial metric that provides insight into a company’s financial leverage and risk. This ratio measures the percentage of a company’s assets that are financed by debt, and hence it provides an understanding of the financial structure of the company. High ratios are typically seen as a sign of higher financial risk because the business has taken on a significant amount of debt, relative to its assets. This could mean the company has a higher chance of defaulting on its debt obligations. Conversely, a lower ratio may suggest the company is less dependent on borrowed money to finance its assets, implying a lower risk. In essence, this ratio is important to investors, lenders, and the company’s management as it indicates the business’s financial stability and its ability to repay its debts.


The Total-Debt-to-Total-Assets ratio reflects a company’s financial leverage, and it is frequently used by investors, lenders and analysts to assess a company’s risk level. High ratios suggest that a company relies significantly on debt to finance its assets–a potentially dangerous position if the cost of debt rises or if the business experiences financial hardship. On the other hand, a lower ratio could suggest that a firm is not utilizing debt as effectively as it could, possibly missing out on growth opportunities. Thus, the Total-Debt-to-Total-Assets ratio provides valuable insights into a company’s balance between risk and potential reward, which are vital for financial decision-making.Moreover, this ratio is a tool that helps in comparing the financial stability of different companies in the same sector. Since industries have different growth and risk profiles, knowing the average Total-Debt-to-Total-Assets ratio in a particular industry can provide context for comparing individual companies. Investors and creditors use this metric not only to identify companies that maintain a healthy balance between debt and equity, but also those that might be carrying too much risk, or not taking enough. This way, the total-debt-to-total-assets ratio provides a snapshot of a company’s financial health and risk profile.


1. Apple Inc.: As of the end of 2021, the tech giant had total debt of approximately $122 billion and total assets of about $365 billion. This gives us a Total-Debt-to-Total-Assets ratio of 0.33 (33%), suggesting that 33% of Apple’s assets have been financed by debt.2. Walmart Inc.: For the year ended January 31, 2022, the retail giant listed total debts of around $74 billion against total assets of about $252 billion, making its Total-Debt-to-Total-Assets ratio approximately 0.29 (29%). This indicates that nearly 29% of Walmart’s assets have been financed by debt.3. Tesla Inc.: In 2021, the electric car and clean energy company had total debts of around $14 billion and total assets of about $52 billion. Therefore, Tesla’s total Debt-to-Total-Assets ratio comes out to roughly 0.27 (27%), implying that 27% of Tesla’s assets were financed by debt. These ratios can vary greatly by industry, and it’s crucial to use them as a comparison tool between similar companies in the same sector. This can provide valuable insights into the company’s leverage, risk exposure, and strategic financial management.

Frequently Asked Questions(FAQ)

What does the term ‘Total-Debt-to-Total-Assets’ mean?

Total-Debt-to-Total-Assets is a financial ratio that shows the proportion of a company’s total debt compared to its total assets. It measures the company’s financial risk or the debt level relative to its assets.

How is ‘Total-Debt-to-Total-Assets’ ratio calculated?

The Total-Debt-to-Total-Assets ratio is calculated by dividing a company’s total debt by its total assets.

What constitutes a ‘high’ Total-Debt-to-Total-Assets ratio?

A high Total-Debt-to-Total-Assets ratio, typically above 0.5 or 50%, indicates that a company is heavily financed by debt and may be at a higher risk of default.

What constitutes a ‘low’ Total-Debt-to-Total-Assets ratio?

A low Total-Debt-to-Total-Assets ratio, typically below 0.5 or 50%, suggests that a company primarily uses equity for financing its operations, indicating less risk.

How should investors interpret the Total-Debt-to-Total-Assets ratio?

This ratio helps investors understand a company’s financial leverage and risk. A higher ratio implies that the company might face difficulty meeting its debt obligations, while a lower ratio signifies less risk.

Is it better for a company to have a higher or lower Total-Debt-to-Total-Assets ratio?

Ideally, a company should maintain a balanced debt-to-assets ratio. A lower ratio is generally better as it indicates less risk. However, this can vary by industry norms.

How frequently is the Total-Debt-to-Total-Assets ratio used in financial analysis?

The Total-Debt-to-Total-Assets ratio is used regularly in financial analysis as it provides insights into a company’s capital structure and financial health.

Can this ratio be used to compare companies in different industries?

While it’s possible to use this ratio across different industries, caution must be exercised due to varying industry norms and standards. Some industries might naturally carry more debt due to their business model.

Is the Total-Debt-to-Total-Assets ratio the only measure of a company’s leverage?

No, it’s one of several metrics used to assess a company’s leverage. Others might include the debt-to-equity ratio, the equity ratio, and the times interest earned ratio.

: What is the Total-Debt-to-Total-Assets ratio used for?

This ratio is used to evaluate a company’s financial stability, comparing the amount of debt it has to its total asset value. It assesses how effectively a business uses debt financing, alongside its ability to continue operations during financial hardship.

Related Finance Terms

  • Asset Liquidity: A measure of the ease with which an asset can be converted into cash without affecting its market price.
  • Capital Structure: The mix of various debt and equity options that a company uses to finance its overall operations and growth.
  • Debt Ratio: A financial ratio that indicates the percentage of a company’s assets that are provided via debt.
  • Equity Ratio: The proportion of the total assets of a company that are financed by stockholders and not creditors.
  • Insolvency: The state of being unable to pay the money owed, by a person or company, on time; those in a state of insolvency are said to be insolvent.

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