All right, let's look at some of our debt ratios. So the two debt ratios we're going to look at here are our debt ratio and our debt equity ratio. Our debt ratio is the total amount of debt that we have relative to our assets, and our debt equity ratio is the total amount of debt that we have to our total owner's equity. Both of these things tell you what we owe relative to what we own. And what we owe relative to our own ownership. There are ways of identifying whether or not we're solvent and how it is that we actually manage our debt. So let's look at a couple of these things. Let's start with our debt ratio. As mentioned, the debt ratio is the total debt to our total assets. Recall, we're still going to use the balance sheet to identify our debt. So we can identify our total debt as the difference between our total assets and our total owner's equity or our total liabilities here. So here's our total debt right there. It's the total liabilities that we have. 30,833 and our total assets here, 38,599. So our debt ratio is total liabilities here 30,833 divided by 38,599. So again, my handy dandy four function calculator. 30,833 divided by 38,599 gives me 0.79. But this means that we have $0.79 in debt for every dollar that we have in assets. Is this good or is this bad? The same period of time we can look at what's going on in industry, what's going on in the sector, what's going on in the S&P, and identify whether we are stronger or weaker relative to our competitors. We're nearly comparable during the same period of time to both the industry and the sector. And we're doing a little bit better than the S&P in our debt asset ratio, or our debt ratio. Let's look at our debt to equity ratio. For this one, we're going to look at our total debt. But instead of looking at our assets, we're going to look at that relative to our total equity here. So we've got 30833 as a ratio of 7766. So I take my handy dandy calculator, it is handy, it is dandy, and I get 0.97. So that means I have almost $4 in debt to every dollar that I have in equity. Is this good, is this bad? During the same period of time the industry was operating at about 4.6, the sector was a little bit lower at about 2.6, the S&P was a lot lower, one and change. So what's happening is we're a little bit better. The amount of debt that we have relative to our equity is a little bit higher than other elements in the S&P, but we're more or less on target with respect to where we are in the sector and the industry. We might want to look at some different competitors, we might want to look at what the goals are. And taking on liabilities as an organization is not inherently bad, if they lead to asset accumulation, they can lead to the sales. Of course we're going to get to that, as well. Here's what I would like you to do. I would like you to try to calculate the debt ratio and the debt to equity ratio for your own company, or a company in your same industry. Grab the balance sheet, try these calculations out, and see if you can interpret what the number means. Next, were going to look at some profit ratios.
