Every business buys on account whether it is a traditional vendor account like that found in retail or simply using a credit card. A third party provides credit which creates debt for the business. The debt ratio reflects the percentage of assets covered by debt.
The debt ratio measures the overall liabilities as a percentage of all assets. It is customarily a tool used to measure leverage used in business. The various business sectors utilize certains standards and parameters for debt and the debt ratio is an excellent barometer to measure compliance.