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MBA NOTES: FINANCIAL LEVERAGE RATIO

FINANCIAL LEVERAGE RATIO

Total Debts to Assets:
Provides information about the company's ability to absorb asset reductions arising from losses without jeopardizing the interest of creditors.

Formula                     Total Liabilities
                                   Total Assets

Capitalization Ratio:
Indicates long-term debt usage.

Formula                 Long-Term Debit
                               Long-Term + Owners Equity

Debt to Equity:
Indicates how well creditors are protected in case of the company's insolvency.

Formula                 Total Debt
                               Total Equity

Interest Coverage Ratio (Times Interest Earned):
Indicates a compaany's capacity to meet interest payments. Uses EBIT (Earnings before interest and taxes)

Formula                  EBIT
                                Interest Expense

Long-term Debt to Net Working Capital:
Provides insight into the ability to pay long term debt from current assets after paying current liabilities.

Formula                  Long-term Debt
                                Current Assets - Current Liabilities

SYNOPSIS OF FINANCIAL ANALYSIS
FINANCIAL STATEMENTS / FINANCIAL REPORTS
USERS OF FINANCIAL STATEMENTS
TYPES OF FINANCIAL ANALYSIS
TOOLS OF FINANCIAL ANALYSIS (METHODS)
RATIO ANALYSIS
CLASSIFICATION OF RATIOS
LIQUIDITY RATIOS
PROFITABILITY RATIOS
LEVERAGE RATIO
EFFICIENCY RATIO




MBA NOTES
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