Which ratio represents the relationship between total liabilities and total assets?

The ratio that represents the relationship between total liabilities and total assets is known as the Debt Ratio. This financial ratio is critical in assessing a company's financial leverage and overall risk level. It is calculated by dividing total liabilities by total assets, which provides insight into the extent to which a company is financed by debt as opposed to equity. A higher debt ratio indicates greater financial risk, as it shows a larger portion of the company’s assets is financed through borrowing. Conversely, a lower ratio suggests a more conservative financing approach with a greater reliance on equity, indicating stronger financial stability. Understanding the implications of the Debt Ratio helps stakeholders evaluate the company’s financial health and risk profile in relation to its asset base.