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The capital structure leverage ratio is a measure of a company's financial risk and indicates the proportion of debt in its capital structure. It is calculated by dividing a company's total debt by its equity. A higher leverage ratio suggests that the company has a greater reliance on debt financing, which may increase financial risk but can also provide potential tax advantages and higher returns for equity holders.

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5mo ago
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9y ago

Capital structure leverage ratio is found using this formula: Shareholders Equity + Long Term Liabilities + Short Term Liabilities divided by Shareholders Equity + Long Term Liabilities

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Q: Capital structure leverage ratio
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Related questions

What is Tier 1 Risk-Based Capital Ratio?

It's the ratio of leverage to core capital at a bank, wikipedia has an excellent explanation


What is a firm's capital structure?

Capital structure is basically how the firm chooses to finance its asset, or is the composition of its liabilities. A large way of measuring capital structure is a firms debt to equity ratio - the higher this ratio is, the more leveraged (the more indebted) the firm is.


What are the advantages and disadvantages of a high leverage ratio?

disadvantages of a high leverage ratio in financial crisis


What Tools and techniques used in financial management?

cost of capital,financial leverage,capital budgeting appraisal methods,ABC analysis,ratio analysis and cash flow statements.


The debt ratio is a measure of a firms what?

Leverage


What is Basic Earnings Power Ratio?

The basic earning power ratio (or BEP ratio) compares earnings apart from the influence of taxes or financial leverage, to the assets of the company. It is just a ratio of the earnings of the company and its assets and does not include the capital invested into the company or the tax and interest liabilities.Formula:BEPR = EBIT / Total Assets


What is a cash flow leverage ratio?

Senior Debt / EBITDA


What is a leverage multiplier ratio?

the return on equity divided by the return on assets


Leverage is increased as the ratio of debt to common stock rises?

True


What does debt to equity ratio tell us?

It tells about the capital structure of the company-how much it is debt financed and how much owner's equity is there.


What is composite leverage?

Composite leverage equals financial leverage times operating leverage. Composite leverage is used to calculate the combined effect of operating and financial leverages. Leverage is the ratio of a company's debt to its equity.


How does new debt effect leverage?

Leverage ratio (debt to equity ratio) is calculated by dividing a company's total debt by the company's total shareholder equity. Therefore, any new debt will raise the leverage ratio (and the risk to the bank). Example: Company has $1,000,000 in Total Assets; $400,000 in debt; $100,000 in other liabilities; and $500,000 in Equity. The company's beginning leverage ratio is 0.8 ($400,000/$500,000). Now, assume the company borrowers $250,000 to purchase additional equipment. The business would then have $1,250,000 in Total Assets; $650,000 in debt; $100,000 in other liabilities; and $500,000 Equity. The company's new leverage ratio would be 1.3 ($650,000/$500,000).