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    mazou's Avatar
    mazou Posts: 1, Reputation: 1
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    #1

    Nov 24, 2013, 07:58 PM
    Debt to Total Assets Ratio
    Total debt to total assets ratio for 2011 is .610 and for 2010 is .521. Is Charles correct to be concerned about these numbers? Explain.
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
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    #2

    Nov 25, 2013, 10:25 AM
    Here is a link that defines the Debt to Total Assets Ratio:

    Total Debt To Total Assets Definition | Investopedia

    Basically with your numbers of .610 at the end of 2011 and .521 at the end of 2010 is saying that you have more debt at the end of 2011 than you had at the end of 2010. Also it means you are financed with a lot of debt. This means that if something happens like loss of revenues or sales decreases you may not be able to pay your bills when they become due. Also you will not be able to take advantage of special opportunities that may come up like a large purchase of inventory at a reduced price or being able to replace or repair equipment like vehicles when they break down because you will not be able to get a loan or you may not have enough cash onhand.

    You need to think what have a high amount of debt in regards to what assets you have like being able to generate cash to pay bills when they become due or what would happen if your equipment were to break down.
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