Debt to Total Asset Ratio

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Debt to Total Asset Ratio measures a company's solvency. It is derived by taking the company's total liabilities and dividing by the company's total assets, which can both be found on the balance sheet. It is similar to the Debt to Capital Ratio because of the Accounting Identity that 

Assets = Liabilities + Shareholder's Equity

This ratio shows how much of the company's asset is acquired through debt or shareholder's equity/ invested capital. A high ratio shows that the company is highly leverage (or incur high debt) and might not be a good thing. This ratio is best looked at in conjunction with Times Interest Earned.

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