Debt ratio is calculated as total liabilities divided by
total assets. It shows the percentage of a company's assets that are financed
with debt.
The higher this ratio,
the more leveraged the company and the greater its financial risk. Debt ratios
vary widely across industries, with capital-intensive businesses such as
utilities and pipelines having much higher debt ratios than other industries
like technology. Banks have probably the highest.
In the consumer lending
and mortgage businesses, debt ratio is defined differently - as total debt
service obligations divided by gross annual income.
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