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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: September 17, 2018

1 Review (2 ratings)Reviews

4
Anonymous Author
Good review of several different important financial ratios presented in a complete and easy to understand method.

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