What does the financing ratio mean

Question 1

What does debt ratio means

Answer 1

This ratios shows the proportion of assets financed through debt

Question 2

What does indebtness ratio mean

Answer 2

This ratio shows a company’s financing strategy:

• If the ratios is above 1 : company is funded primarily through debt (external financing)
• If the ratio is below 1: company is funded primarily through equity (internal financing)