Leverage Ratio
factor.formula
Leverage Ratio:
This formula calculates a company's leverage level at a specific point in time, with the denominator being the company's total assets and the numerator being the company's total liabilities.
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Refers to the total amount of all liabilities of an enterprise at the end of a specific reporting period, including current liabilities and non-current liabilities. Specifically, current liabilities refer to debts that need to be repaid within one year or one operating cycle, such as accounts payable and short-term loans, etc.; non-current liabilities refer to debts that have a repayment period of more than one year or one operating cycle, such as long-term loans and bonds payable, etc.
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Refers to the total amount of all assets of an enterprise at the end of a specific reporting period, including current assets and non-current assets. Specifically, current assets refer to assets that can be converted into cash or consumed within one year or one operating cycle, such as cash, inventory, accounts receivable, etc.; non-current assets refer to assets that cannot be converted into cash or consumed within one year or one operating cycle, such as fixed assets, intangible assets, etc.
factor.explanation
The leverage ratio is an important indicator for measuring corporate financial risk. The higher the ratio, the more the company relies on debt financing, and its financial risk is relatively high. Generally speaking, companies with high leverage ratios are more likely to face debt repayment pressure during economic downturns. However, moderate leverage can improve the profitability of a company. Therefore, the analysis of the leverage ratio needs to be comprehensively evaluated in combination with factors such as industry characteristics, corporate scale and profitability. This indicator has important reference value for creditors to assess the debt repayment ability of a company and for investors to assess the risk level of a company. When comparing this indicator across industries, it should be noted that the reasonable leverage level that different industries can bear may vary greatly.