Formula to
calculate financial leverage ratio:
Financial Leverage
Ratio = total debt / shareholders equity.
Financial
leverage ratio definition and explanation:
The
financial leverage ratio is also referred to as the debt
to equity ratio.
The financial
leverage ratio indicates the extent to
which the business relies on debt financing.
Upper acceptable
limit of the financial leverage
ratio is usually 2:1, with no more than one-third of
debt in long term.
A high financial
leverage ratio
indicates possible difficulty in paying interest and
principal while obtaining more funding.
The financial leverage ratio is
included in the financial statement ratio analysis
spreadsheets highlighted in the left column, which
provide formulas, definitions, calculation, charts and
explanations of each ratio.
The financial leverage ratio is listed in our leverage
ratios.
The financial leverage ratio and other ratios are key
to understanding financial statements. Our
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Spreadsheets to
calculate ratios (includes formulas, definitions,
explanations and charts):
See list
of ratios , or the financial statement ratio
analysis spreadsheets which are not highlighted in the
left column, to see which other ratios our spreadsheets
calculate, define and explain.
The financial leverage
ratio may be included in our
custom 1, 3 or 5 period financial
statement ratio analysis spreadsheet.
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explanations for each ratio. (Includes Debt
to Equity (financial leverage) Ratio).
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