The proportion of a firm's total assets that is being financed with borrowed funds. The debt ratio is calculated by dividing total long-term and short-term liabilities by total assets. For example, a firm with assets of $1,000,000 and $150,000 in short-term debts and $300,000 in long-term debts has a debt ratio of ^$450,000/_$1,000,000 , or 45%. A low debt ratio indicates conservative financing with an opportunity to borrow in the future at no significant risk. Compare bond ratio.