The solvency ratio known as debt to total assets is calculated by which of the following?

The debt to total assets ratio is calculated by taking total liabilities and dividing that figure by total assets. This ratio provides insight into the financial leverage of a company, indicating what portion of the company’s assets is financed through debt. A higher ratio suggests that a larger proportion of the company’s assets are funded through borrowing, which may imply greater financial risk.

Understanding this ratio is critical for assessing a company's solvency, as it reflects the degree to which the company relies on debt to finance its assets. A lower ratio generally indicates a more stable financial position, while a higher ratio may suggest potential risks in meeting long-term obligations.

In contrast, total assets divided by total liabilities measures the inverse relationship, which does not provide the same useful insight into debt levels. Owner's equity to total liabilities and total liabilities to owner’s equity also represent different financial metrics that do not directly measure the ratio of debt to total assets. Therefore, utilizing total liabilities divided by total assets accurately captures the relationship needed to assess solvency through the lens of debt financing.