How to Calculate Debt to Total Assets

Calculating your ration of debts to total assets can give you a picture of your personal or business financial status. Ideally, you need to have more assets than debt. Businesses that have a debt to asset ratio greater than 1 are considered to be less stable and less attractive as an investment opportunity. Having a personal debt ratio that is too high can hurt your credit and make you less likely to be able to borrow money or to open new credit card accounts. You can calculate your debt to asset ratio by following a few simple steps.

Things You'll Need

• Asset value
• Debt value
• Calculator

Instructions

1. Calculate the total worth of your assets. A financial asset is anything you own that is of monetary value. For instance, if you own a car that's worth $13,000, a savings account that's worth $20,000 and household items (furniture, artwork and other valuables) equal to $7000, your assets would be $40,000.

2. Calculate your total debt. For example, you might owe $5000 on a boat and $20,000 on a student loan, which would make your total debts $25,000.

3. Divide your total assets by your total debt. For this example, you would complete the following equation: 25,000/40,000 = 0.625.

4. Multiply the figure from step 3 by 100 if you want to see the answer in terms of a percentage. Therefore, 0.625 x 100 = 62.5 or 62.5 percent.

References

• Financial term definitions