Debt to Total Assets ratio measures a company's financial risk which determines how much of company’s assets have been financed by debt. This ratio measures company’s solvency as well. This is a very broad ratio which includes all the short-and long-term debt and all types of both tangible and intangible assets.
If the ratio is less than one indicates the company’s assets are financed through equity. Same as that ratio is greater than one, most of the company’s assets are financed through debt. Higher the ratio the greater the risk will be associated. More than that higher the ratio indicates the low borrowing capacity of a firm, which in turn will indicate financial flexibility. The number it yields tells investors a number of things.
To improve the Debt to Assets ratio, a company could do so many things like debt-equity swap, an additional stock issue or selling assets to pay down some of the debt. Therefore companies use strategies depending on the conditions and how much they want to improve that debt/asset ratio number.
Actually this ratio differ from one company to another, depend on the company specific situations. Some companies manage to do well with the high no ratio due to number of reasons.
Total Debt x 100
Total Assets
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