The Debt Ratio, Projects The Relationship Between The Total Assets And Total Debts Of The Company

1517 Words Oct 2nd, 2015 7 Pages
The Debt Ratio, projects the relationship between the total assets and total debts of the company. This ratio is used to measure the financial risk of the company. In order to measure the financial risk, we need to look at the amount of debt that the company has incurred due to the financing of operations. This is done by comparing the total debt to the total assets of the company, from there we derive a debt percentage. The total debt amount includes, current and non-current liabilities. Whilst, the total assets amount includes, current and non-current assets. The overall ratio is expressed as a percentage. This percentage indicates how much of debt is incurred by the company, when financing its operations. If the overall percentage is high, it implies that the company is at a financial risk as there is a relatively high proportion of debt.As potential investors would not want to in a company which has a high percentage of debts.Whilst a low overall percentage, the company is at a low financial risk and are handling their debts well. The

The Debt Ratio has increased from 49.81% in 2013 to 65.02% in 2014, with and overall increase of 15.21%. This percentage [ 49.81% ], is an indication of the amount of debt that Aspen Pharmacare has incurred in order to purchase or finance its operations according to the equity it has accumulated. The increase in debt, means that the liabilities of Aspen Pharmacare have increased since the past year. Implying that Aspen Pharmacare has…

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