What is the acceptable result for a debt ratio?

The debt ratio is a financial ratio that measures the proportion of a company's total liabilities to its total assets. It is an indicator of financial leverage and solvency. A debt ratio lower than 50% is generally viewed as a sign of good financial health because it indicates that a company has greater assets than liabilities, meaning it is less reliant on debt for financing.

Having a debt ratio below 50% suggests that the company has a sound capital structure, with most of its assets financed by equity rather than debt. This lower ratio indicates to investors and creditors that the company is in a safer position to meet its financial obligations and may have greater flexibility in dealing with economic downturns or other financial challenges.

In contrast, higher debt ratios (50% and above) may raise concerns for investors and stakeholders, as they indicate a higher level of financial risk. A ratio above 100% suggests that a company has more liabilities than assets, which can be a signal of potential solvency issues in the future. Therefore, a debt ratio lower than 50% is considered acceptable and reflects less financial risk.