Definition
Using borrowed money to increase potential returns. More debt = more leverage = more risk and reward.
F
Financial Leverage
Related Terms
Debt Ratio
Measures what percentage of assets are financed by debt. Formula: Total Liabilities ÷ Total Assets. Higher ratio = more financial risk.
Equity Multiplier
A leverage ratio showing how much assets are multiplied by equity financing. Formula: Total Assets ÷ Total Equity. Used in DuPont analysis.
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