Question

Financial leverage ratios minimum of three formulas?

Answer 1

1) Debt ratio= Total Debt

Total Assets

Explaination =: Debit ratio is financial ratio that show the proportion of a Company's assest that are finance by debt.Its also referred as debt-to-assest ratio.It can be expressed as percentage or decimal form.The higher debt ratio means the company have higher financial risk.

2) Debit-To-Equity Ratio= Debt (Long term debt + Short term debt)

Equity

Explaination =: In this ratio debt means total liabilities and equity means total shareholder equity.Its measures company total debt in relation to total value of net assest. A higher debt-to-equity ratio indicate more financing from outside in comparison of investor financing.

3) Interest Coverage Ratio = EBIT(Earning before interest & taxes)

Interest Expense

Explaination =: This ratio measures how many times company interest expense is cover with available earning.In other words its show company capacity of paying its interest expense. A higher interest coverage ratio means company have good capacity of paying its interest expense.