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Debt to Tangible Net Worth is a credit ratio that compares a company’s total debt outstanding relative to the value of its total assets minus intangible assets.
Debt to tangible net worth ratio is the ratio measure the lender’s protection if the company when bankrupt. It is the comparison of a company’s total liabilities to owner equity (shareholder equity) exclude any intangible asset.
A good debt to tangible net worth ratio varies by industry and company size, but generally, a ratio of 0.5 or lower is considered healthy. This means that a company has more tangible assets than debt, which can provide a buffer against financial difficulties.
What is the Debt to Tangible Net Worth Ratio? The Debt to Tangible Net Worth Ratio is a financial metric that compares a company's total debt to its tangible net worth. Tangible net worth, unlike the broader net worth, excludes intangible assets such as goodwill, patents, and trademarks.
Debt to Tangible Net Worth Ratio = Total Debt / Total Tangible Net Worth. Because this ratio takes the intangible assets out of the company’s total assets, it’s often known as the debt to tangible net worth ratio. You can easily find all of these figures reported on a firm’s balance sheet.
Debt to Tangible Net Worth is a key financial ratio that measures a company’s leverage and ability to cover its debt obligations. It is an important metric for investors, creditors, and analysts to evaluate the financial health of a company.
The debt to tangible net worth ratio is calculated by taking the company's total liabilities and dividing by its tangible net worth, which is the more conservative method used to calculate this ratio. The formula is: Total Liabilities/Tangible Net Worth = Debt to Tangible Net Worth Ratio.
The tangible net worth calculation is designed to represent the total value of a company's physical assets net of its outstanding liabilities, as based on figures shown in the company's...
Debt to Tangible Net Worth Ratio – a ratio indicating the level of creditors’ protection in case of the firm’s insolvency by comparing company’s total liabilities with shareholder’s equity (excluding intangible assets, such as trademarks, patents etc.).
The Debt to Tangible Net Worth ratio assesses a business's leverage by excluding intangible assets. It's crucial for firms with significant intangibles. A lower ratio is preferable, indicating lower risk. Changes may result from profit, expansion, debt repayment, or capital activities.