Debt Ratios Calculator
Analyze financial health and solvency. This calculator provides three critical ratios used by banks and investors to determine a company's ability to manage its debt.
Earnings Before Interest and Taxes
What is the "Debt Ratio"?
The debt ratio measures the proportion of a company's assets that are financed by debt. It is calculated as Total Debt / Total Assets. A ratio greater than 1.0 means the company has more debt than assets, while a ratio less than 0.5 means most assets are financed by equity.
What is the Debt-to-Equity (D/E) ratio?
The D/E ratio compares a company's total liabilities to its shareholder equity. it is used to gauge a company's financial leverage. A high D/E ratio often means a company has been aggressive in financing its growth with debt.
What does "Times Interest Earned" (TIE) mean?
The TIE ratio measures a company's ability to meet its debt obligations based on its current income. It is calculated as EBIT (Earnings Before Interest and Taxes) / Total Interest Expense. A higher TIE indicates a stronger ability to pay interest.
What is a "healthy" debt ratio?
This varies by industry. However, for most companies, a debt ratio between 0.3 and 0.6 is considered healthy. Very high ratios may make it difficult to borrow more money or survive economic downturns.