a) Debt ratio = Total debts

Total assets

 Where total debt = fixed charge capital + liabilities.

The ratio indicate the proportion of total assets that has been financed using long term and current liabilities e.g a debt ratio of 0.45 mean 45% of total asset has been financed with debt while the remaining 55% was financed with owners equity/capital.

 b) Times interest earned ratio = Operating profit (earning before interest and tax

Interest Charges