Debt-to-Assets Ratio: Formula, Analysis, and What It Means for Investors
Warren Team
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Key terms
- AssetAnything of value that an individual or company owns, such as cash, investments, real estate, or personal property. Assets are the foundation of building wealth.
- Debt-to-Income Ratio (DTI)The percentage of your gross monthly income that goes toward paying debts. Lenders use DTI to assess your ability to manage monthly payments and repay borrowed money.
- Debt-to-Income RatioA financial metric that compares your total monthly debt payments to your gross monthly income, expressed as a percentage. Lenders use this ratio to assess your ability to take on additional debt, and most mortgage lenders prefer a ratio below 43%. A lower debt-to-income ratio indicates you have a healthy balance between debt and income.
- Expense RatioThe annual fee that all funds or ETFs charge their shareholders, expressed as a percentage of assets. Lower expense ratios mean more of your money is invested rather than going to fees.
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