Both the debt ratio and the debt-to-equity ratio utilize what type of values?

The debt ratio and the debt-to-equity ratio typically rely on book values. These ratios are calculated based on the values reported on the balance sheet, which reflect the historical cost of the company's assets and liabilities.

The debt ratio measures the proportion of a company's total assets that are financed by debt, while the debt-to-equity ratio compares a company's total liabilities to its shareholders' equity. Both metrics provide insight into the financial leverage and risk profile of the company and are informative for assessing financial health, particularly from an accounting perspective.

Using book values is essential for these calculations because they represent what the company has recorded on its financial statements, ensuring standardization and consistency in financial reporting. Market values, on the other hand, would fluctuate over time based on current market conditions, potentially leading to an inaccurate picture of financial stability if used in these ratios. This difference underlines why book values are the correct choice for calculating these financial ratios.