Leverage Ratio is an idea of how a change in a company's output will affect their operating income. It is used to measure a company's mix of operating costs, showing how a change in the company's ideas will affect the output of their operating income.
disadvantages of a high leverage ratio in financial crisis
Leverage
Senior Debt / EBITDA
True
the return on equity divided by the return on assets
Composite leverage equals financial leverage times operating leverage. Composite leverage is used to calculate the combined effect of operating and financial leverages. Leverage is the ratio of a company's debt to its equity.
Define these Levels of Measurement.NominalOrdinalInterval/Ratio
When the second element of the ratio is 1.
Leverage ratio (debt to equity ratio) is calculated by dividing a company's total debt by the company's total shareholder equity. Therefore, any new debt will raise the leverage ratio (and the risk to the bank). Example: Company has $1,000,000 in Total Assets; $400,000 in debt; $100,000 in other liabilities; and $500,000 in Equity. The company's beginning leverage ratio is 0.8 ($400,000/$500,000). Now, assume the company borrowers $250,000 to purchase additional equipment. The business would then have $1,250,000 in Total Assets; $650,000 in debt; $100,000 in other liabilities; and $500,000 Equity. The company's new leverage ratio would be 1.3 ($650,000/$500,000).
Leverage ratios are used to find out that how much earnings has effects on overalll cashflows and profit of business.
It's the ratio of leverage to core capital at a bank, wikipedia has an excellent explanation
Leverage is using debt to finance investments.Leverage ratio is the ratio between the size of the debt and some metric for the value of the investment.There are several financial leverage ratios, for companies the debt-to-equity ratio is the most common one: Total debt / shareholder equity.As an example we can use the debt-to-equity ratio for a home with a market value of $110,000 and a mortgage of $100,000: Debt is $100,000 and equity is $10,000 (market value minus debt), giving a debt-to-equity ratio of 100,000/10,000 = 10.The general idea is that very low leverage means that a company isn't growing as quickly as it could, while a very high leverage means that a company is vulnerable to temporary setbacks in sales or increases in interest rate.What is considered a 'good' ratio varies quite a bit between different types of business.See also related links.