Ratios & Quality

Financial Leverage

Expresses financial burden and its coverage as a percentage of another economic base. This allows intensity, efficiency or coverage to be compared without company size dominating the reading.

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Financial Leverage

financialLeverageRatio · Ratios & Quality

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Definition: Expresses financial burden and its coverage as a percentage of another economic base. This allows intensity, efficiency or coverage to be compared without company size dominating the reading.
Calculation: Average assets / average equity.
Uses: Useful for comparing similar models and tracking efficiency, pricing power, financial risk or taxation. It can mislead across sectors or with one-offs, restructuring or accounting-policy changes. Complement with growth, FCF, ROIC, asset turnover and notes.