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What is Debt Ratio?

A Debt Ratio is a financial ratio that indicates the percentage of a company’s assets that are provided via debt. It is the ratio of total debt (the sum of current liabilities and long-term liabilities) and total assets (the sum of current assets, fixed assets, and other assets such as ‘goodwill‘). Ratios can be expressed as a decimal value, such as 0.10, or given as an equivalent percent value, such as 10%. Business owners can evaluate their balance sheet to be more proactive about their finances

What is Financial Leverage? 

In finance, leverage is any technique involving the use of borrowed funds in the purchase of an asset, with the expectation that the after-tax income from the asset and asset price appreciation will exceed the borrowing cost. Normally, the finance provider would set a limit on how much risk it is prepared to take and will set a limit on how much leverage it will permit, and would require the acquired asset to be provided as collateral security for the loan. For example, for a residential property, the finance provider may lend up to, say, 80% of the property’s market value, for a commercial property it may be 70%. Guaranteed accurate financial reporting is one of the many benefits of working with a professional bookkeeping firm. Knowing and understanding your current debits will help your business create efficient budgets and project achievable organizational goals with accurate and meaningful financial reports.

What is an Accounting Ratio? 

A financial ratio or accounting ratio is a relative magnitude of two selected numerical values taken from an enterprise’s financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization.

Financial ratios can be calculated with information from your income statement and may be used by managers within a firm, by current and potential shareholders (owners) of a firm, and by a firm’s creditors. Financial analysts use financial ratios, like gross profit and gross profit margin, to compare the strengths and weaknesses of various companies. If shares in a company are traded in a financial market, the market price of the shares is used in certain financial ratios.

Can a Bookkeeper Help My Business Grow?

Accurate financial reports provided by outsourced and virtual bookkeeping services will help your business focus on growth and organizational planning. Paisley Solutions, based in Kennett Square, PA, works with all types of business owners and non-profit organizations in Southeastern Pennsylvania, Delaware, and Maryland. Contact Paisley Solutions for a free business needs analysis.