The given statement is true.
A debt ratio measures the amount of leverage used by a company in terms of total debt to total assets. This ratio varies widely across industries, such that capital-intensive businesses tend to have much higher debt ratios than others. A company's debt ratio can be calculated by dividing total debt by total assets.
From a pure risk perspective, debt ratios of 0.4 or lower are considered better, while a debt ratio of 0.6 or higher makes it more difficult to borrow money. While a low debt ratio suggests greater creditworthiness, there is also risk associated with a company carrying too little debt.
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