Financial Leverage - Meaning, Formula, Calculation & Interpretations

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This tutorial covers the most important aspects of the Financial Leverage Ratio. You will learn precisely what the Financial Leverage Ratio is, how to calculate it, and how to interpret the findings. Using the Colgate Case Study, we will also go over how to calculate Financial Leverage in Excel.
You can download the Colgate Financial Leverage template from this link - www.wallstreetmojo.com/ratio-...
What is Financial Leverage?
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The financial leverage ratio is used to determine the impact of debt on a company's total profitability. A high ratio indicates that the fixed costs of running the firm are high, while a low ratio indicates that the fixed costs of running the business are low.
Formula
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Financial leverage Formula = % change in Net Income / % change in EBIT
Interpretation
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- The more debt a company has, the greater its financial leverage.
- Data from the last five to ten years should be used to determine financial leverage.
For more details, you can refer to our article - www.wallstreetmojo.com/financ...
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Пікірлер: 7

@narayanbista490 2 жыл бұрын

Video quality was very clear and the tutorial explain in this video was very helpful and knowledgeable.

@jyotikrupashankarsingh2582 2 жыл бұрын

Interpretation of this ratio was very clear and was very easy to understand

@jahangirsacademy6064 2 жыл бұрын

Thank you so much sir for making the ratio analysis process very easy

@tanyawhite8678 2 жыл бұрын

in depth explanation.

@mkdwin01 2 жыл бұрын

Sir Any M&N case study if Provide then it will be very Helpful for us sir ...

@distorteddingo9230 2 жыл бұрын

Not being able to explain the meaning of Colgate's degree of financial leverage defeats the entire point of calculating the ratio and your video. Saying I can't come to a conclusion is terrible reply in any presentation. In the future pick a company you can explain what the ratio actually means for the business.