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 » SPONSORED BY INVESCO The Complete Guide to ETFs ETFs are becoming increasingly popular and soaring to new heights among investors. Invesco's insights can help you determine if these investment vehicles are right for you. Learn 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