Leverage Ratio Formula
Leverage ratios show how much debt a company holds concerning other equity and assets. Leverage ratio formulas exist in several forms and are designed to help determine the stability and security of a company.
Types of leverage ratios
Leverage ratios include debt to equity, equity multiplier, debt-to-capitalization ratio, and debt-to-capital ratio.
What is a debt ratio?
Debt ratio compares the value of assets to the outstanding debt. Simply divide the total amount of debt by the total value of the assets.
Debt to assets ratio = debt/assets
What is the debt-to-equity ratio?
Equity is the total amount of a company’s assets minus its liabilities. A debt-to-equity ratio compares the amount of debt the company holds against the amount of equity it has.
Debt to equity ratio = total debt / total equity
This glossary provides an overview of some key legal terms for startups. It's essential to consult with a legal professional to ensure a comprehensive understanding of these terms and their implications for your specific situation.
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