Several financial metrics are used to measure a business's debt obligations, including:
Debt-to-Equity Ratio: This ratio compares the companyâs total debt to its shareholders' equity, indicating the proportion of financing that comes from debt versus equity. Interest Coverage Ratio: This ratio measures the companyâs ability to pay interest on its outstanding debt, calculated as earnings before interest and taxes (EBIT) divided by interest expenses. Current Ratio: This ratio compares a companyâs current assets to its current liabilities, providing an indication of its short-term liquidity.