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.

Note: This course is also a part of The Controllership Series.

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: August 9, 2023

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 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. Financial Statement Audit in Accordance with GAAS - General Standards
  13. Financial Statement Audit in Accordance with GAAS - Conducting the Audit
  14. Financial Statement Audit in Accordance with GAAS - Auditors' Report and Opinion
  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

15 CoursesManagement Oversight, Analysis and Internal Controls Certification

  1. Management Internal Control Essentials
  2. Comprehensive Examination of COSO 2013: Components and Principles
  3. Keys to an Effective Code of Conduct
  4. Fraud Risk Assessments
  5. Enterprise Risk Management 101
  6. Identifying and Implementing the Proper Balance of Internal Controls
  7. Information Technology (IT) Controls in Emerging Business Environments
  8. Analyzing Financial Ratios - Solvency, Liquidity and Debt
  9. Analyzing Financial Ratios - Leverage
  10. Effectively Managing and Controlling Travel and Entertainment (T&E) Expenses
  11. Keys to Understanding Conflicts of Interest
  12. Documentation Methods For Internal Control Processes
  13. Segregation of Duties for Core Business Processes
  14. Professional Skepticism - Keys to Maintaining
  15. Whistleblower Hotlines - Effective Management
15 Reviews (67 ratings)

Reviews

4
Member's Profile
Interesting course on various Financial Statement ratios related to leverage and capital structure. Recommend taking the related Solvency ratios class first as there is some overlap.
5
Anonymous Author
This was a very informative class, but I feel the need to study the content more, since the purpose is to understand what the ratios show not just what they are.
4
Member's Profile
Hard course. Lots of good information and valuable, but the test questions were a little specific and had to review material again to pass.
5
Anonymous Author
This is another excellent course on ratios by Lynn Fountain. She makes the information easy to understand and provides good examples.
5
Anonymous Author
The instructor did a nice job of explaining the Degree of Financial Leverage, one of the more complex concepts of the course.
4
Anonymous Author
Good review of several different important financial ratios presented in a complete and easy to understand method.
4
Anonymous Author
Excellent presentation and examples of how to use financial ratios to analyze leverage in a company.
5
Anonymous Author
This was an interesting course. The way the slides are setup I had to think though some scenarios.
5
Anonymous Author
These have always been a bit confusing to me when analyzing, so this was a good refresher.
5
Anonymous Author
Great course. Stated learning objectives were met. Instructor was effective
5
Member's Profile
Enjoyable course with a lot of information given. Little more challenging.
5
Anonymous Author
Great refresher on financial ratios. Glossary is helpful to have on hand.
3
Member's Profile
The formulas were hard to follow because of the formatting in the slides
4
Member's Profile
This was very helpful. The detailed problem summary at the end helped.
4
Anonymous Author
Enjoyable review of Debt and Leverage ratios for a company!
show all reviews
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 .
Instructor for this course
  Course Overview CPE
Course Syllabus
INTRODUCTION AND OVERVIEW
  Introduction to Financial Ratio Analysis – Leverage Ratios4:19
  Math & Leverage Ratios9:13
  Leverage Risk & Ratios 8:56
  Capital Structure and Debt/Equity7:31
  Debt Capital & Degree of Financial Leverage16:07
  Debt/EBITA4:51
  Equity/Assets7:28
  Comprehensive Example & Summary9:56
CONTINUOUS PLAY
  Financial Ratio Analysis – Leverage Ratios Full Video1:08:21
SUPPORTING MATERIALS
  Slides: Financial Ratio Analysis – Leverage RatiosPDF
  Financial Ratio Analysis – Leverage Ratios Glossary/IndexPDF
REVIEW AND TEST
  REVIEW QUESTIONSquiz
 FINAL EXAMexam