I read about following equation Net barrowing = DR(FCINV-Dep) + DR(WCInv) DR= target debt ratio Does DR Means debt/Assets? How is this equation derived? If company gets income, does income not used for fixed capital and working capital? I know I am not clear on my question. Appreciate for any comments?
In my momery, DR equals debt/asset when company invest in net FC and WC, it should finance debt on that ratio.