Which ratio indicates a firm's reliance on debt for financing purposes?

The debt-to-equity ratio is a key financial metric that indicates the proportion of a company's funding that comes from debt compared to equity. This ratio is calculated by dividing total liabilities by total equity. A higher debt-to-equity ratio suggests that a firm is more reliant on borrowed funds to finance its operations and growth, indicating greater financial leverage.

In contrast, the asset-to-equity ratio measures the total assets relative to shareholders' equity, which does not specifically reflect the use of debt. The average collection period assesses how efficiently a company collects on its receivables and is unrelated to the financing structure. The fixed asset turnover ratio evaluates how effectively a company uses its fixed assets to generate sales, which again does not pertain directly to the reliance on debt. Thus, the debt-to-equity ratio is the most relevant measure for understanding a firm's level of debt financing.