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Financial ratios are financial metrics that determine relationships between aspects of a company’s operations and financial position. The next course in this series on financial ratios is focused on leverage ratios. Leverage is created through various situations including when:

  • A company takes on debt to purchase specific assets.
  • A company borrows money based on the overall creditworthiness of the business.
  • A company borrows money to finance an acquisition. 
  • A private equity firm (or other company) does a leveraged buyout.  
  • An individual works with options, futures, margins or other financial instruments.

Equity investors borrow money to leverage their investment portfolio. A leverage ratio looks at how much capital comes in the form of debt (loans) or assesses the ability of a company to meet its financial obligations.  The leverage ratio is important given that companies rely on a mixture of equity and debt to finance their operations.

This course focuses on various leverage ratios, their purpose, calculation, and meaning.

Learning Objectives

  • Review basic ratio analysis math concepts.
  • Identify the types of leverage ratios.
  • Evaluate the purpose and calculation of various leverage ratios including:
    • Debt-to-Assets Ratio
    • Debt-to-Equity Ratio
    • Debt-to-Capital Ratio
    • Debt-to-EBITDA Ratio
    • Equity to Asset Ratio
  • Explore the concept of capital structure ratios.
    • Debt to capitalization ratio
    • Degree of financial leverage
  • Explore a comprehensive example of ratio calculation
Last updated/reviewed: November 16, 2019

Included In Certifications

This course is included in the following Certification Programs:

18 CoursesFinancial Statement Preparation, Reporting and Auditing Certification

  1. Financial Statement Introduction
  2. GAAP Principles, Assumptions and Considerations
  3. GAAP Presentation of Financial Statements
  4. Management Discussion and Analysis (MD&A) Update
  5. Sarbanes Oxley (SOX) Overview
  6. Sarbanes-Oxley Section 302: ICFR
  7. XBRL (Extensible Business Reporting Language) Introduction to Basics - Updated
  8. XBRL - Connection to SOX 302/404 and Critical Roles
  9. Analyzing Financial Ratios - Solvency, Liquidity and Debt
  10. Analyzing Financial Ratios - Leverage
  11. Analyzing Financial Ratios - Performance And Efficiency
  12. Conducting An Audit In Accordance With GAAS - Part 1
  13. Conducting An Audit In Accordance With GAAS - Part 2
  14. Conducting An Audit In Accordance with GAAS - Part 3
  15. Introduction to Accounting for Income Taxes Based on Income
  16. Practical Application For Accounting For Income Taxes Based On Income Part 1
  17. Practical Application For Accounting For Income Taxes Based On Income Part 2
  18. FASB Codification Research System

2 Reviews (7 ratings)Reviews

4
Anonymous Author
Good review of several different important financial ratios presented in a complete and easy to understand method.
5
Anonymous Author
Great course. Stated learning objectives were met. Instructor was effective

Prerequisites

Course Complexity: Foundational

No Advanced Preparation or Prerequisites are needed for this course. However, it is recommended to take the other courses in the series prior to completing this one.

Education Provider Information

Company:
Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact:
For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Course Syllabus
INTRODUCTION AND OVERVIEW
  4:18Introduction to Financial Ratio Analysis – Leverage Ratios
  9:13Math & Leverage Ratios
  8:55Leverage Risk & Ratios
  7:31Capital Structure and Debt/Equity
  16:08Debt Capital & Degree of Financial Leverage
  4:51Debt/EBITA
  7:27Equity/Assets
  9:56Comprehensive Example & Summary
CONTINUOUS PLAY
  1:08:21Financial Ratio Analysis – Leverage Ratios Full Video
SUPPORTING MATERIALS
  PDFSlides: Financial Ratio Analysis – Leverage Ratios
  PDFFinancial Ratio Analysis – Leverage Ratios Glossary/Index
REVIEW AND TEST
  quizREVIEW QUESTIONS
 examFINAL EXAM