Finance Formulas / July 18, 2018 / Tatiana Douglas
Debt ratio is a solvency ratio that measures a firm’s total liabilities as a percentage of its total assets. In a sense, the debt ratio shows a company’s ability to pay off its liabilities with its assets. In other words, this shows how many assets the company must sell in order to pay off all of its liabilities.
Breakeven quantity is the number of incremental units that the firm needs to sell to cover the cost of a marketing program or other type of investment, says Avery. If the company doesn’t sell the equivalent of the BEQ as a result of the investment, then it’s losing money and it won’t recoup its costs. If the company sells more than the BEQ then it not only has made its money back but is making additional profit as well.
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