The total-debt-to-total-assets ratio is important for any company because it shows the amount of financial leverage a company is using. Leverage can be a double-edged sword, as it can increase returns for shareholders, but also potentially increase risk. If a company has a high total-debt-to-total-assets ratio, it may indicate that it is highly leveraged, meaning that the creditors of the company would likely have a great deal of influence over the company’s operations if the company fails to meet its debt payment obligations in a timely manner.

A carefully controlled debt-to-assets ratio is important for the health of any company, as debt can add fuel to a business’s growth and provide it with resources to expand operations. On the other hand, if the ratio is too high, the company could face a significant amount of risk if creditors forces it to liquidate or if debt payments interfere with operational expenses or cash flow. The lender can also limit investments, further restricting the company’s ability to grow.

An investor should look at the company’s total-debt-to-total-assets ratio to understand the amount of leverage the company is using. If this ratio is too high, an investor may want to examine why to understand if the risk associated with the investments is worth it. For example, an investor may want to look into the company’s repayment history to understand if the debt is manageable. Additionally, an investor should compare the company’s ratio to that of its industry peers to get a better understanding of how the company is managed and which company has the best balance between debt and equity. The total-debt-to-total-assets ratio should always be interpreted within its context and the overall health of a company’s financials should be evaluated with many different metrics.