Finance Leverage Ratio

Total Debts to Assets:

Provides information about the company’s ability to absorb asset reductions arising from losses without jeopardizing the interest of creditors.


Total Liabilities
Total Assets

Capitalization Ratio:

Indicates long-term debt usage.


Long-Term Debt
Long-Term Debt + Owners’ Equity

Debt to Equity:

Indicates how well creditors are protected in case of the company’s insolvency.


Total Debt
Total Equity

Interest Coverage Ratio (Times Interest Earned):

Indicates a company’s capacity to meet interest payments. Uses EBIT (Earnings Before Interest and Taxes)


Interest Expense

Long-term Debt to Net Working Capital:

Provides insight into the ability to pay long term debt from current assets after paying current liabilities.


Long-term Debt
Current Assets – Current Liabilities


Post Author: Muraya Muya