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Running Head: DEBT TO ASSETS RATIOS 1 Debt to Assets Ratio Student’s Name Institutional Affiliation
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DEBT TO ASSETS RATIO 2 Debt to Assets Ratio Debt capital is cheaper than equity capital. Therefore, companies prefer financing their projects with debt to shareholders' equity (Financial Ratios, 2013). Conversely, an excessive amount of debt can cause problems for the organization. The liability to assets ratio, also known as debt ratio is a leverage metric that indicates the percentage of firm assets funded by with debt. A high ratio implies a greater degree of leverage and financial risk (Debt to Assets Ratio, 2015). Typically, creditors use the debt to assets ratio to determine the debt amount in an organization, the ability to repay its liabilities, and the possibility or impossibility of extending the additional loans of a firm. Still, investors employ this ratio to gauge the solvency of the company, its ability to offset current and future obligations and to generate a return on their investment.
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  • Spring '16
  • Dr. samuel
  • Finance, Debt, Financial Ratio, assets ratio

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