ANZ New Zealand

The debt ratio gives an indication of the gearing level of your business.

To gauge your business' overall position you may need to combine the input figures if there is more than one entity, for example if the assets are held in a different entity to the trading entity.

Use information from your business' annual balance sheet to input into the calculator.

For information on using this calculator see below.

• The deductibility of interest from business expenses can provide tax advantages.
• Returns on equity can be higher.
• Debt can provide a suitable source of capital to start or expand a business.

Some disadvantages can be:

• Sufficient cash flow is required to service a higher debt load. The need for this cash flow can place pressure on a business if income streams are erratic.
• Susceptibility to interest rate increases.
• Channelling cash flow to service debt may starve expenditure in other areas such as development which can be detrimental to overall survival of the business.

The calculation used to obtain the ratio is:

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