Debt ratio
Imagine you have a piggy bank where you save your pocket money. You also sometimes borrow money from your parents to buy toys or candy. Now let's say you have $10 in your piggy bank and you borrowed $5 from your parents.
Your debt ratio is like a fraction that helps you compare how much money you owe (the $5 you borrowed) to how much money you have (the $10 in your piggy bank).
To calculate your debt ratio, you simply divide your debt (the $5 you borrowed) by your assets (the $10 in your piggy bank) and multiply by 100.
So, your debt ratio would be 50% because you owe half (50) of your total assets (100).
Debt ratio is an important concept for adults too, as it helps them understand how much debt they have compared to their overall financial situation. Generally, a lower debt ratio is considered better because it means you owe less money compared to what you have.
Your debt ratio is like a fraction that helps you compare how much money you owe (the $5 you borrowed) to how much money you have (the $10 in your piggy bank).
To calculate your debt ratio, you simply divide your debt (the $5 you borrowed) by your assets (the $10 in your piggy bank) and multiply by 100.
So, your debt ratio would be 50% because you owe half (50) of your total assets (100).
Debt ratio is an important concept for adults too, as it helps them understand how much debt they have compared to their overall financial situation. Generally, a lower debt ratio is considered better because it means you owe less money compared to what you have.
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