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Tutorial on Beginning Debt Management Financial Ratio Analysis

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Overview of Debt Management Ratio Analysis
Tutorial on Beginning Debt Management Financial Ratio Analysis

Balance Sheet

Rosemary C. Peavler

Tip: Click on the image to see it in full screen mode. You will also see it in a different window so you can read the explanation and see the image at the same time.

In order to analyze the debt position of your company, you need to have the company's balance sheet and income statement at your disposal. You will need information off both of these financial statements. The debt ratios look at the company's assets, liabilities, and stockholder's equity.

Here is the balance sheet we're going to use in this tutorial. You can see that there are two year's of data for this hypothetical firm. This is because ratio analysis is only a good tool if we can compare the ratios we calculate to either other year's of data or to industry averages.

If you click ahead, you will see that we'll use these balance sheets and the 2007 income statement to calculate the 2007 debt ratios for the firm. Then, we'll compare them to the 2008 debt ratios while explaining each and what their change from year to year means. You can replicate the results for your own firm.

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