What is a 'Leverage Ratio'?

A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or that assesses the ability of a company to meet financial obligations. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

Term of the Day | Words to Know Leverage Ratio A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt (loans) or assesses the ability of a company to meet its financial obligations. The leverage ratio category is important because companies rely on a mixture of equity and debt to finance their operations, and knowing the amount of debt held by a company is useful in evaluating whether it can pay its debts off as they come due. Read More » Related to "Leverage Ratio" How Investors Use Leverage Ratios to Gauge Financial Health Investors use a variety of leverage ratios—including the debt-to-equity and interest coverage ratios—to identify firms with unhealthy debt levels. Read More » What Are Financial Risk Ratios and How Are They Used to Measure Risk? Explore some of the primary financial risk ratios that investors and analysts commonly use to evaluate a company's overall financial health. Read More » 4 Leverage Ratios Used In Evaluating Energy Firms These four leverage ratios can help investors evaluate how energy companies manage their debt. Read More » Related Definitions Debt Debt is an amount of money borrowed by one party from another, often for making large purchases that they could not afford under normal circumstances. Read More » Interest Expense An interest expense is the cost incurred by an entity for borrowed funds. Read More » Tier 1 Leverage Ratio The tier 1 leverage ratio measures a bank's core capital to its total assets. The ratio uses tier 1 capital to judge how leveraged a bank is in relation to its consolidated assets. Read More » Debt-To-Equity Ratio The debt-to-equity (D/E) ratio indicates how much debt a company is using to finance its assets relative to the value of shareholders' equity. Read More » CONNECT WITH INVESTOPEDIA Email sent to: mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here. 114 West 41st St, floor 8 New York NY 10036 © 2020, Investopedia, LLC, All Rights Reserved | Privacy Policy