Moneyzine
/Investment Guides /Debt and Leverage Ratios Calculator

Debt and Leverage Ratios Calculator

Moneyzine Editor
Author: 
Moneyzine Editor
2 mins
October 4th, 2023
Advertiser Disclosure

This calculator provides the user with the three most common debt ratios. Using assets, liabilities, and owner's equity from the balance sheet, and operating income and interest expense from the income statement, this calculator provides the debt, debt-to-equity, and interest coverage ratio.

Calculator Definitions

The variables used in our online calculator are defined in detail below, including how to interpret the results.

Assets ($)

Often defined as an economic resource, which is owned by the corporation and expected to provide future benefits to its operation; the total assets of a business are found on the company's balance sheet.

Liabilities ($)

Also referred to as the debts of a corporation, nearly all businesses, even the most successful and profitable of companies, make purchases on credit. The total liabilities of a business are found on the company's balance sheet.

Owner's Equity ($)

The resources that have been invested by the owners of the company; the owner's equity in a business are found on the company's balance sheet.

Accounts Receivable ($)

This is money owed to the company by its customers, but not yet paid.

Operating Income ($)

This is the measure of a company's ability to earn money from ongoing operations; a business's operating income is found on the company's income statement.

Interest Expense ($)

The payments that have come due on amounts borrowed by the company; interest expense can be found on a company's income statement.

Debt Ratio

The value for debt ratio is found by dividing liabilities by assets. Generally, it's desirable to have a debt ratio that is less than 0.5. As is the case with many financial ratios, benchmark comparisons should be made against companies in similar industries.

Debt to Equity

This next ratio compares liabilities to owner's equity. This measure tells the analyst how much debt is used to finance the company's assets relative to equity. Debt to equity ratios can vary greatly by industry.

Interest Coverage

Also known as times interest earned, this measure provides an indication of a company's ability to meet its interest payments using income generated by ongoing operations. As a general rule, the interest coverage ratio should be around 3.0 or higher; benchmarks and comparisons should be made between companies in similar industries.


Debt and Leverage Ratios Calculator


Disclaimer: These online calculators are made available and meant to be used as a screening tool for the investor. The accuracy of these calculations is not guaranteed nor is its applicability to your individual circumstances. You should always obtain personal advice from qualified professionals.

Related Content

  • What Can Help You Meet Your Budget While Shopping for Important Items?
    Budgeting while ensuring you don't compromise on quality can seem daunting. Whether filling your pantry, updating your wardrobe, or keeping up with the latest tech, smart shopping strategies are crucial for keeping your finances in check.
    April 2nd, 2024
  • How to Make a Million Dollars in 10 Years
    Truthfully, this title should actually be “How to Make a Million Dollars in 10 Years Without Going Into Debt", but that is just getting a little too winded for my liking. It’s true though!
    November 5th, 2024
  • How to Apply Maslow’s Hierarchy to Your Money This Year
    You might vaguely remember your psychology teacher talking about Maslow. He pointed at a picture of a triangle as you nodded off in the back of the school room.
    November 5th, 2024
  • How to Tackle Multiple Savings Goals
    When there’s only so much money to go around, there are often multiple savings goals competing for your money. Think of the young professional who’d like to get a more reliable car, buy a house, and save for retirement. Or consider the young family that’s saving for college, retirement, and a bigger house.
    March 22nd, 2024
  • The Countdown to Early Retirement: 10 Expenses to Eliminate
    Dreaming of waving goodbye to the daily grind five years ahead of schedule? The road to early retirement is paved with more than good intentions; it requires a meticulously crafted strategy with surprising twists. It's not solely about what you should be doing—like diligently saving a portion of your income or investing wisely—but also about what you need to stop doing.
    March 22nd, 2024

Contributors

Moneyzine Editor
The Moneyzine editorial team consists of writers and content specialists with diverse backgrounds.
Moneyzine 2024. All Rights Reserved.