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Business Debt Ratio Calculator

Easily calculate your debt ratio to assess business leverage. Get insights on debt-to-equity, debt-to-assets, and interest coverage ratios.

Business & Tax · Reviewed by FreeCalculators Editorial · Updated 2026-09-01

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How it works

The Business Debt Ratio Calculator evaluates your company's financial leverage by calculating three key ratios: Debt-to-Equity, Debt-to-Assets, and Interest Coverage Ratio. The Debt-to-Equity ratio is determined by dividing total debt by total equity, indicating how much debt is used for every dollar of equity. For example, if your total debt is $200,000 and equity is $300,000, the calculation is $200,000 ÷ $300,000 = 0.67. This means you have $0.67 of debt for every dollar of equity. The Debt-to-Assets ratio is calculated by dividing total debt by total assets, showing what portion of your assets is financed by debt. Using the same figures, $200,000 ÷ $500,000 = 0.40, indicating 40% of your assets are financed by debt. Lastly, the Interest Coverage Ratio is calculated by dividing EBITDA by interest expenses, reflecting your ability to pay interest on outstanding debt. If EBITDA is $100,000 and interest expenses are $20,000, the ratio is $100,000 ÷ $20,000 = 5. This means you can cover your interest payments five times over.

Tips

  • Regularly update your financial figures to maintain accurate debt ratios.
  • Aim for a Debt-to-Equity ratio below 1 to ensure you are not over-leveraged.
  • Monitor your Interest Coverage Ratio; a value below 2 may indicate financial strain.
  • Use these ratios to inform your financing decisions and assess risk.

Frequently asked questions

What is a good Debt-to-Equity ratio?
A Debt-to-Equity ratio below 1 is generally considered healthy, indicating you have more equity than debt.
How do I calculate my Interest Coverage Ratio?
Divide your EBITDA by your interest expenses. For example, if your EBITDA is $100,000 and interest expenses are $20,000, your ratio is 5.
What does a Debt-to-Assets ratio of 0.40 mean?
It means that 40% of your total assets are financed through debt, which is a moderate level of leverage.
How often should I check my business debt ratios?
It's advisable to review your debt ratios quarterly or after any significant financial changes to stay informed.