Debt-to-Assets Ratio
Total interest-bearing debt divided by total assets. The fraction of assets financed by debt.
When to use: Use as an alternative leverage measure that's less sensitive to fluctuations in equity (which depends on accumulated retained earnings, write-downs, and accounting policies). D/A is often more stable and comparable across firms.
Formula
Variables
| Symbol | Name | Description | Unit |
|---|---|---|---|
| DA | Debt-to-Assets Ratio | Total debt / total assets | integer |
| TotalDebt | Total Debt | Short-term + long-term interest-bearing debt | $ |
| TotalAssets | Total Assets | Total assets on the balance sheet | $ |
Real-Life Examples
Example 1: Capital-Intensive Firm
Total debt $800M, total assets $2,000M.
Given
Step-by-Step
D/A of 0.40 — 40% of assets are debt-financed. The remaining 60% comes from equity and non-debt liabilities. Moderate leverage.
Frequently Asked Questions
Both convey similar information; the choice is preference. D/A is between 0 and 1 (more interpretable); D/E can take any positive value and is more sensitive to equity changes. Use both for triangulation.
Yes — typically include all interest-bearing debt regardless of maturity. Some analysts exclude short-term debt rolled continuously (treated as operating). Be consistent across periods and firms.