Debt to equity, debt to assets and interest coverage ratio

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The debt-to-equity (D/E) ratio is a measure of a company's financial leverage, and it is calculated by dividing total liabilities by shareholders' equity. It is one of the key ratios used to assess a company's financial health and stability. A high D/E ratio indicates that a company has more debt than equity, which can be risky because it means that the company has borrowed more money than it can pay back with its own resources. On the other hand, a low D/E ratio indicates that a company has more equity than debt, which can be a sign of financial stability and strength.

The debt-to-assets (D/A) ratio is a measure of a company's total debt in relation to its total assets. It is calculated by dividing total liabilities by total assets. This ratio is used to assess the degree to which a company is financed by debt, and it is a key indicator of the company's solvency. A high D/A ratio indicates that a company has a large amount of debt relative to its total assets, which can be a sign of financial risk. Conversely, a low D/A ratio indicates that a company has a lower level of debt and is likely to be more financially stable.

The interest coverage ratio is a measure of a company's ability to meet its interest payments on outstanding debt. It is calculated by dividing earnings before interest and taxes (EBIT) by interest expenses. This ratio indicates the extent to which a company's earnings can cover its interest payments. A high interest coverage ratio indicates that a company has a strong ability to meet its interest obligations, which can be a sign of financial stability. Conversely, a low interest coverage ratio suggests that a company may be at risk of defaulting on its debt obligations, which can be a warning sign for investors.