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Monday, April 18, 2011

Debt to Asset Ratio Formula & Example

Definition: Debt to Asset Ratio is calculated by dividing the firm’s total liabilities by its total assets. It indicates the percentage of a firm's assets that are financed via debt.

Formula:
Debt to Asset Ratio = Total Debt / Total Assets
(Note: total debt is the sum of long-term liabilities and current liabilities)

Example 1:
Penn Ltd has $400,000 in assets, $80,000 in liabilities, and

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