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What is Tier 1 Risk-Based Capital Ratio?
It's the ratio of leverage to core capital at a bank, wikipedia has an excellent explanation
What is Equity Capital Ratio?
The Equity Capital Ratio is a financial metric that measures the proportion of a company's total equity relative to its total assets. It is calculated by dividing total equity by total assets, expressed as a percentage. A higher ratio indicates a greater reliance on equity funding, which can signify financial stability, while a lower ratio may suggest higher leverage and increased financial risk. This ratio helps investors assess a company's capital structure and financial health.
What is a firm's capital structure?
Capital structure is basically how the firm chooses to finance its asset, or is the composition of its liabilities. A large way of measuring capital structure is a firms debt to equity ratio - the higher this ratio is, the more leveraged (the more indebted) the firm is.
What ratios assess the degree of financial leverage in a firm's capital structure?
Ratios that assess the degree of financial leverage in a firm's capital structure include the debt-to-equity ratio, which compares total liabilities to shareholders' equity, indicating the proportion of debt financing relative to equity. The debt ratio, calculated as total debt divided by total assets, shows the percentage of a firm's assets financed by debt. Additionally, the interest coverage ratio, which measures earnings before interest and taxes (EBIT) against interest expenses, evaluates a firm's ability to meet its interest obligations. These ratios provide insights into the firm's financial risk and leverage position.
What are the advantages and disadvantages of a high leverage ratio?
disadvantages of a high leverage ratio in financial crisis
What Tools and techniques used in financial management?
cost of capital,financial leverage,capital budgeting appraisal methods,ABC analysis,ratio analysis and cash flow statements.
Which category of ratios is useful in assessing the capital structure and long term solvency of a firm?
The category of ratios useful for assessing a firm's capital structure and long-term solvency is known as leverage ratios. These ratios, such as the debt-to-equity ratio and interest coverage ratio, help analyze the extent to which a company is financed by debt versus equity and its ability to meet long-term obligations. By evaluating these ratios, stakeholders can gauge the financial risk and overall stability of the firm.
Basic tools of capital-structure management include?
Basic tools of capital-structure management include debt financing, equity financing, and hybrid financing. Companies must consider factors such as cost of capital, risk tolerance, and financial flexibility when determining the optimal mix of debt and equity in their capital structure. Additionally, financial ratios like debt-to-equity ratio, interest coverage ratio, and return on equity are used to evaluate and manage the capital structure.
The debt ratio is a measure of a firms what?
Leverage
What is Basic Earnings Power Ratio?
The basic earning power ratio (or BEP ratio) compares earnings apart from the influence of taxes or financial leverage, to the assets of the company. It is just a ratio of the earnings of the company and its assets and does not include the capital invested into the company or the tax and interest liabilities.Formula:BEPR = EBIT / Total Assets
What does the gearing ratio indicate?
The gearing ratio indicates the relative proportion of a company's debt to its equity, reflecting the financial risk associated with its capital structure. A higher gearing ratio suggests that a company relies more on borrowed funds, which can increase potential returns but also heightens financial risk during downturns. Conversely, a lower gearing ratio indicates a more conservative approach with less reliance on debt. Investors and analysts use this ratio to assess a company's financial stability and leverage.
What Debt equality ratio is?
The debt equity ratio is a financial metric that compares a company's total liabilities to its shareholders' equity. It is calculated by dividing total debt by total equity, providing insights into the company's financial leverage and risk. A higher ratio indicates greater reliance on debt for financing, which can imply higher financial risk, while a lower ratio suggests a more conservative approach with less debt relative to equity. This ratio is important for investors and creditors to assess a company's capital structure and overall financial health.
