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
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.