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What is Debt Ratio?

Johns Wu Posted in Glossary by Johns Wu
June 18, 2006 12:33 AM - 1 Comments

Debt Ratio

The borrower’s monthly obligation divided by their income. This is also known as debt-to-income ratio. For companies, the debt ratio gives investors an idea on the financial health of the company or its ability to face risks with its debt load. It also gives an insight on the ability of the individual or the company to pay its debt. Debt ratio is only one of the many tools that can help present the whole financial picture of a company.

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  1. Penelope said:
    on February 23rd at 09:17 am

    Thank’s a lot fot post! Well, as it was mentioned above, the debt to income ratio calculates the percentage of debt the person has in relation to the amount of money he/she earns and this number gives a lender information about the amount of additional debt an individual will be able to handle. It’s not very difficult to calculate it with the help of certain calculator that can be found on the Internet .

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