DEBT RATIO measures the percent of total funds provided by creditors. Debt includes both current liabilities and long-term debt. Creditors prefer low debt ratios because the lower the ratio, the greater the cushion against creditors losses in liquidation. Owners may seek high debt ratios, either to magnify earnings or because selling new stock would mean giving up control. Owners want control while "using someone elses money." Debt Ratio is best compared to industry data to determine if a company is possibly over or under leveraged. The right level of debt for a business depends on many factors. Some advantages of higher debt levels are:
Some disadvantages can be:
Formula: Total Liabilities / (Total Liabilities + Stockholders Equity)
GROSS PROFIT METHOD is an inventory estimate based on gross margin.
K as the fifth letter of a Nasdaq stock symbol indicates that the issue has no voting rights.
Enter a term, then click the entry you would like to view.