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Leverage Ratio (Debt to Equity) – Meaning, Formula, Calculation & Interpretations [Video]

Leverage Ratio (Debt to Equity) – Meaning, Formula, Calculation & Interpretations

In this tutorial, we will comprehensively learn all about the Leverage Ratio, also known as the Debt to Equity Ratio. The meaning, formula, examples, calculations, and interpretation of the Leverage Ratio are all covered in this tutorial. Using the Colgate Case Study, we will also learn how to calculate Leverage Ratio in Excel.

You can download the Colgate Leverage Ratio template from this link – https://www.wallstreetmojo.com/ratio-analysis-template/

What is Leverage Ratio?
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The leverage ratio, commonly known as the debt to equity ratio, determines how much debt a company has compared to its equity. This is an important ratio for bankers since it indicates the company’s ability to repay loans with its own funds.

Formula
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Leverage Ratio (Debt to Equity) Formula = Total Debt (current + long-term) / Shareholders’ Equity

Interpretation
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– A lower ratio is generally thought to be desirable because it implies that the company’s assets cover its liabilities with its own capital.
– An increasing leverage ratio over time indicates that the company is unable to generate enough cash flow from its core business and is relying on external debt to stay afloat.
– Capital-intensive sectors have a higher leverage ratio in contrast to the service sector.

For more details, you can refer to our article – https://www.wallstreetmojo.com/debt-to-equity-ratio/

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Categories
Resources for Accountants

How to Start an Online Business 2021 | Step-By-Step Guide and Dozens of Free Online Business Tools [Video]

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Resources for Accountants

Aggressive Revenue Recognition Techniques, Part 1 [Video]

Aggressive revenue recognition occurs when companies (a) prematurely recognize revenue or (b) recognize bogus sales. Here are some ways companies have prematurely recognized revenue:(1) channel stuffing(2) changing the dat of the fiscal year-end(3) holding the fiscal year open(4) recording revenue before shipment(5) shipping uncompleted products and assembling them elsewhere(6) recording revenue for a full shipment when only a partial shipment was made(7) announce a forthcoming price increase(8) recognizing all the revenue upfront for a long-term contract— Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education accessible to all people.— SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS* http://eepurl.com/dIaa5z— LISTEN TO THE SCHEME PODCAST* Apple Podcasts: https://podcasts.apple.com/us/podcast/scheme/id1522352725* Spotify: https://open.spotify.com/show/4WaNTqVFxISHlgcSWNT1kc* Website: https://www.edspira.com/podcast-2/ — CONNECT WITH EDSPIRA* Website: https://www.edspira.com* Blog: https://www.edspira.com/blog/ * Facebook page: https://www.facebook.com/Edspira* Facebook group: https://www.facebook.com/groups/561316587899818//* Reddit: https://www.reddit.com/r/edspira* LinkedIn: https://www.linkedin.com/company/edspira— CONNECT WITH MICHAEL* Website: http://www.MichaelMcLaughlin.com* LinkedIn: https://www.linkedin.com/in/prof-michael-mclaughlin * Twitter: https://www.twitter.com/Prof_McLaughlin* Facebook: https://www.facebook.com/prof.michael.mclaughlin* Snapchat: https://www.snapchat.com/add/prof_mclaughlin*Twitch: https://twitch.tv/prof_mclaughlin * Instagram: https://www.instagram.com/prof_mclaughlin*TikTok: https://www.tiktok.com/@prof_mclaughlin