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Financial Leverage Ratio

2010/11/24 13:56:00 44

Financial Leverage Ratio Teller

 

Financial leverage means

enterprise

Using debt to regulate equity capital gains.

Financial leverage ratio refers to the ratio of corporate debt financing.


Financial leverage ratio


(1) property rights ratio.

Reflected by

Claims

The relative relationship between the liabilities funds provided by the person and the rights and interests provided by the owner as well as the stability of the basic financial structure of the company.

The formula is: equity ratio = total liabilities, shareholders' equity.

The equity ratio indicates that a shareholder is willing to provide a loan for each dollar he provides.

In the period of inflation intensification, companies can borrow more debt to pfer losses and risks to creditors. During the boom period, companies can borrow more and get extra profits.


(2) asset liability ratio.

Debt reflecting

financing

The importance of the company.

The formula is: asset liability ratio = total liabilities and total assets.

There is a direct relationship between asset liability ratio and financial risk: the higher the asset liability ratio, the higher the financial risk; conversely, the lower the asset liability ratio, the lower the financial risk.


(3) long-term liabilities to long-term capital ratios.

Reflects the relative importance of long-term liabilities for capital structure (long-term financing).

The formula is: long term liabilities to long-term capital ratio = long term liabilities and long term capital.

Long term capital is the sum of all long-term liabilities and shareholders' equity.

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Standard Financial Ratios

The standard financial ratio refers to the average financial ratio of a specific country, a specific period and a specific industry. Such as standard liquidity ratio, standard asset liability ratio and standard total assets turnover.