The debt-to-total assets ratio is calculated by dividing a company's total debt by its total assets. It helps assess a company's debt capacity.
For example, a business with $800,000 in total debt and $1,200,000 in total assets has a debt-to-total assets ratio of 0.67, meaning 67% of its assets are financed by creditors. A lender may view a ratio above 0.70 as a sign of financial risk.
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