when calculated over several years this leverage ratio can show a company s use of leverage as a function of time for example a ratio that drops 0 1 every year for ten years would show that as a company ages it reduces its use of leverage 
investors use the ratio to evaluate whether the company has enough funds to meet its current debt obligations and to assess whether it can pay a return on its investment creditors use the ratio to see how much debt the company already has and whether the company can repay its existing debts this will determine whether additional loans will be extended to the firm a total debt to total asset ratio greater than one means that if the company were to cease operating not all debtors would receive payment on their holdings real world example of the total debt to total assets ratiolet s examine the total debt to total assets ratio for three companies here s what each company s ratio can tell you about it it s also important to understand the size industry and goals of each company to interpret their total debt to total assets google is no longer a technology start up it is an established company with proven revenue models that make it easier to attract investors meanwhile hertz is a much smaller company that may not be as enticing to shareholders hertz may find investor demands are too great to secure financing turning to financial institutions for capital instead total debt to total assets may be reported as a decimal or a percentage for example google s 30 total debt to total assets may also be communicated as 30 this means that 30 of google s assets are financed through debt limitations of the total debt to total assets ratioone shortcoming of the total debt to total assets ratio is that it does not provide any indication of asset quality since it lumps all tangible and intangible assets together for example in the example above hertz reported 2 9 billion in intangible assets 1 3 billion in ppe and 1 04 billion in goodwill as part of its total 20 9 billion of assets 3 therefore the company had more debt 18 2 billion on its books than all of its 15 7 billion current assets assets that can be quickly converted to cash 