Debt-to-Asset Ratio Calculator Measure financial leverage and solvency risk — the percentage of assets funded by debt. ...
Debt-to-Asset Ratio Calculator
Measure financial leverage and solvency risk — the percentage of assets funded by debt.
The Debt-to-Asset Ratio measures the proportion of a company’s assets that are financed by debt.
Formula: $$\text{Debt-to-Asset} = \frac{\text{Total Debt}}{\text{Total Assets}}$$
Interpretation:
- < 30% — Conservative: Low financial risk, strong equity base
- 30% – 60% — Moderate: Balanced leverage — typical for growing firms
- 60% – 80% — Aggressive: High reliance on creditors; watch cash flow
- > 80% — High Risk: Vulnerable to interest rate hikes or revenue dips
Real Examples (2024):
• Apple: 78% (uses debt for buybacks, repatriation optimization)
• Tesla: 58% (growth-financed leverage)
• Lehman (2007): 95%+ (precursor to collapse)
⚠️ The ratio has critical blind spots:
- Off-balance-sheet debt — Operating leases, pension deficits, and guarantees don’t appear (though ASC 842 now requires lease capitalization).
- Asset quality — Overvalued goodwill or obsolete inventory inflates denominator.
- Cash flow mismatch — High debt + low operating cash flow = refinancing risk.
- Interest burden — A 60% ratio at 3% interest ≠ 60% at 8% (see: Interest Coverage Ratio).
Always pair with:
- Debt-to-Equity = Total Debt / Total Equity
- Interest Coverage = EBIT / Interest Expense (≥3.0 healthy)
- Altman Z-Score — Predicts bankruptcy risk using 5 ratios including D/A
Acceptable leverage varies by capital intensity:
| Industry | Typical Range | Why? |
|---|---|---|
| Technology | 20% – 40% | Asset-light; high retained earnings |
| Manufacturing | 40% – 60% | PP&E-heavy; cyclical cash flows |
| Real Estate | 50% – 75% | Leverage core to ROI (e.g., REITs average ~65%) |
| Utilities | 60% – 70% | Stable cash flows support high debt |
📉 Trend > absolute value: A rising ratio + falling EBIT = warning sign — even if still “moderate.”
➡️ Basic Mode
Quick snapshot: pull total debt & assets from the balance sheet.
➡️ Detailed Mode
Analyze structure:
- How much debt is short-term (refinancing risk?)
- What % of assets are intangible (volatile in downturns?)
- Equity cushion size (Total Assets − Total Debt)
Select your industry to compare against peers.
Note: Use GAAP-consistent figures (e.g., include capitalized leases under ASC 842).