Max Debt Ratio Calculator

Formula

To calculate the Max Debt Ratio (MDR):

\[ MDR = \frac{MD}{I} \times 100 \]

Where:

$MDR$ is the Max Debt Ratio in percentage
$MD$ is the Maximum Debt in dollars
$I$ is the Total Income in dollars

What is Max Debt Ratio?

The Max Debt Ratio is a financial metric that represents the percentage of a person's or entity's total income that goes towards servicing debt. It is used by lenders to determine the borrowing capacity and financial health of an individual or organization. A lower debt ratio indicates better financial health and a higher ability to take on additional debt.

Example Calculation

Let's assume the following values:

Maximum Debt ($MD$) = $50,000
Total Income ($I$) = $200,000

Using the formula:

\[ MDR = \frac{50,000}{200,000} \times 100 = 0.25 \times 100 = 25\% \]

The Max Debt Ratio is 25%.