What Is Total Debt Ratio

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invest their investment into company shares because the company day to day falling which is not a good situation. In figure 3.4 company average very low from industry that show the management of century paper mill did not use their assets efficiently for generating sale.
Figure 3.4

4. Debt ratio
A ratio is defined to be long term and short term debt to total assets the debt ratio companies is used to grow. Higher the debt ratio means companies have more leverage.
4.1 Total Debt ratio:
Definition: Total debt ratio is used to measure the financial risk of business because the total assets may not be enough to pay off its debts. Theoretical Concept: Debt ratio is a critical indicator for long term business while if a company has a low debt …show more content…

The debt to equity ratio shows the percentage of company financing that comes from creditors and investors.
Theoretical concept: Each industry has different debt to equity ratio benchmarks, as some industries tend to use more debt financing than others. A debt ratio of .5 means that there are half as many liabilities than there is equity. In other words, the assets of the company are funded 2-to-1 by investors to creditors. This means that investors own 66.6 cents of every dollar of company assets while creditors only own 33.3 cents on the dollar. A lower debt to equity ratio usually implies a more financially stable business. Companies with a higher debt to equity ratio are considered riskier to creditors and investors than companies with a lower ratio. Unlike equity financing, debt must be repaid to the …show more content…

We don’t need to calculate this because it’s available in every company income statement at the bottom of income statement after net income. Earning per share is the same as any profitability or market prospect ratio. Higher earnings per share is always better than a lower ratio because this means the company is more profitable and the company has more profits to distribute to its shareholders. Although many investors don't pay much attention to the EPS, a higher earnings per share ratio often makes the stock price of a company rise. Since so many things can manipulate this ratio, investors tend to look at it but don't let it influence their decisions

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