How To Calculate Debt To Income Ratio
What is the formula for calculating debt to income ratio?
Hi, my name is Grant Hobson. I am working as a financial analyst. Today, I am going to talk to you about some business market calculations and ratios. How to calculate debt to income ratio. Two key components are the financial position of your income and debts. So debt to income ratio is a simple easy calculation giving assumption on financial position and you can look at the personal perspective and also the business perspective. We would go for an example just to demonstrate how the calculation works. It is very simple. So in terms of formula, total the debt and divide that by total income, you will get the ratio about 0.36 which is congesting very high and you want to start consider to that position. Demonstrate a high concerning ratio now to that level. Take 1.2 million debt and income 2.4 million. We will get the debt to income ratio as 50 above the 0.36 percent. Now, take an okay position. Reduce the debt to 2, 50,000 pounds which is a big decline and slight variation in income, 2.1 million, you will get a debt to income ratio of 12 percent. So, it's a low variation in debt to income. So the financial position is more secure. .