Debt Ratio Calculation Based on ROA and ROE

What is the Debt ratio based on the given ROA and ROE?

Compute the Debt ratio.

Debt Ratio Calculation:

The Debt ratio is approximately 63.7%.

The Debt ratio is an important financial metric that indicates the percentage of a company's assets that are financed by debt. It is calculated by taking the total debt of a company and dividing it by the total assets. In this case, we can calculate the Debt ratio using the formula (1 - (ROA/ROE)) * 100.

Given that the Return on Assets (ROA) is 10.7% and the Return on Equity (ROE) is 29.5%, we can plug these values into the formula to find the Debt ratio. The computation would be (1 - (0.107/0.295)) which equals to approximately 0.6368 or 63.7% when rounded to one decimal place.

Therefore, based on the provided ROA and ROE, the Debt ratio is approximately 63.7%.

It is important for investors and analysts to consider the Debt ratio when evaluating a company's financial health and stability. A high Debt ratio may indicate that a company is heavily reliant on debt to finance its operations, which can increase financial risk. On the other hand, a low Debt ratio may signal financial stability and a lower risk profile.