How can I analyze the debt from the annual reports? What ratios are helpful in determining, if a company is to debt heavy?

Quote- "Two of the most commonly used ratios for evaluating leverage are the Debt Ratio and the Times Interest Earned ratio. The debt ratio simply takes the total assets less the total equity (basically, the total debt), and divides it by the total assets. The ratio gives a percentage of the company that is financed by debt.

For example, a company using 28% debt will be said to be more leveraged than a company using 10% debt in its capital structure. Alta Genetics' debt ratio is 64%. The Times Interest Earned ratio compares the amount of interest that is owed every year to the amount of money earned before interest and tax.By dividing Earnings (before interest and tax) by the interest paid that year, an analyst can get a good idea of what percentage of the company's earnings is being used to finance debt.

If you're only making $100, but owe $110 a year in interest, you're not doing nearly as well as if you only owed $10 a year in interest. By seeing how much earnings are going back to the company and how much are going to the creditors, you can get a pretty good idea of how leveraged the company is. For Alta Genetics, the Times Interest Earned ratio is 1.32, so a good deal of the money earned this year is going straight to the interest expense a fact that is very much consistent with the high (64%) debt the company is carrying.

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Debt to Income Ratio (DTI) reflects how much of your gross monthly income is used towards your monthly debt payments. You can calculate your DTI using the Debt to Income Ratio Calculator. Just enter your debt payments and annual income in order to calculate your DTI.

For this you can also analyze balance sheet of the company. The balance sheet lets you know a company's assets (things that are worth money), liabilities (debts that are owed), and net worth (the difference between the two). It can actually tell you so much more!

By combining the balance sheet with other financial statements, you can calculate ROE, ROA, and a lot of other ratios that we'll teach you how to perform.

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