Market leverage
factor.formula
The calculation formula of market leverage ratio is:
This formula calculates the ratio of a company's non-current liabilities plus its market value relative to its market value and is used to measure the degree of leverage of a company's assets.
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Refers to the debts listed on the company's balance sheet with a maturity date of more than one year, including long-term loans, bonds payable, etc. This part of liabilities is usually related to the company's long-term investment and operations.
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Refers to the market value of a company's stock. It is calculated by multiplying the total number of issued shares by the current stock price. It is an important indicator of the company's overall value.
factor.explanation
The market leverage ratio reflects the extent to which a company supports its assets through debt financing. The higher the ratio, the more the company relies on debt, and the risk to shareholders' equity may also increase accordingly, which may also bring higher potential returns. It is worth noting that the higher the market leverage ratio, the better. Excessive leverage levels may lead to increased financial risks for companies, and in the event of an economic downturn or poor management, they may face a higher risk of bankruptcy. Investors should comprehensively evaluate the rationality of the company's leverage level based on factors such as the company's profitability, cash flow, and the industry environment in which it is located.