Financial Glossary
High Debt Ratio
The debt ratio measures the share of a company's total assets financed by debt, calculated as total liabilities divided by total assets. A high debt ratio means a large portion of the assets are funded by creditors rather than owners, indicating greater financial leverage. What counts as high is relative to the industry and the stability of the business's cash flows.
Problem & Application
For a campground, STR portfolio, or real-estate operator carrying mortgages and equipment loans, a high debt ratio raises the stakes during slow seasons, since fixed debt payments continue even when occupancy drops. Lenders and prospective buyers read it as elevated risk, which can mean higher borrowing costs or tougher loan terms. Tracking it over time tells an owner whether the business is deleveraging or sliding deeper into obligations.
In Short
A high debt ratio is not automatically bad, but it demands disciplined cash management and a clear plan to service obligations through cycles.