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What is Leverage Ratio: Meaning, Types and Importance

What Is Leverage Ratio?

What Does a Leverage Ratio Tell You?

What Are the Types of Leverage Ratios?

What Are Some Common Leverage Ratios?

Here is a list of some common leverage ratios and their formulas:

Common Leverage Ratio


Debt to Equity Ratio

Total debt of a Company / Total equity capital

Debt to Assets Ratio

Total debt of the Company / Total assets acquired

Debt to Capital Ratio

Total debt of company / (Total debt + Total capital of the entity)

Debt to EBIDTA Ratio

Total debt / Total debt to earnings before interest, depreciation, taxes and amortisation (EBIDTA)

Asset to Equity Ratio

Total assets of the company / Total equity capital

Interest Coverage Ratio

Total operating income / Total interest expenses

What Is the Importance of a Leverage Ratio?

What Is Leverage Ratio in Debt Covenants?