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Definition – What is the debt to income ratio?
Debt to income is a ratio of a firm’s total debt to their level of income.
Formula – How to calculate debt to income ratio
Debt to Income = Total Debt / Net Income
Example
A company has total debt of $5,000 and net income of $2,500.
Debt to Income = $5,000 / $2,500 = 2
Therefore, this company’s debt to income ratio is 2.
Sources and more resources
- Wikipedia – Debt-to-income ratio – Different methods for calculating debt to income.
- Investopedia – Debt-To-Income Ratio – DTI – A summary of the debt-to-income ratio.
- The Balance – Debt-to-Income Ratios – How debt-to-income is calculated for personal finance.