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Leverage RATIO

The document outlines various solvency ratios used to assess a company's financial health, including the Debt-to-Equity Ratio, Debt-to-Assets Ratio, Debt Service Coverage Ratio, and Interest Coverage Ratio. Each ratio is defined with its formula and interpretation, indicating how they measure financial leverage, reliance on debt, debt servicing capability, and ability to pay interest. Higher values in these ratios generally suggest increased financial risk or better financial health depending on the context.

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7 views3 pages

Leverage RATIO

The document outlines various solvency ratios used to assess a company's financial health, including the Debt-to-Equity Ratio, Debt-to-Assets Ratio, Debt Service Coverage Ratio, and Interest Coverage Ratio. Each ratio is defined with its formula and interpretation, indicating how they measure financial leverage, reliance on debt, debt servicing capability, and ability to pay interest. Higher values in these ratios generally suggest increased financial risk or better financial health depending on the context.

Uploaded by

tusarkarmakar700
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Solvency

Ratios
Type of Ratios

₹ Liquidity

Current Ratio

Quick Ratio

Cash Ratio

Operating Cash Flow Ratio

Turnover

Fixed Assets Turnover Ratio

Inventory Turnover Ratio

Receivables Turnover Ratio

Working Capital Turnover Ratio

Payables Turnover Ratio

Cash Conversion Cycle Ratio

Profitability

Gross Profit Ratio

Net Profit Ratio

Operating Profit Ratio

Return On Capital Employed Ratio

Return On Assets Ratio

Return On Equity Ratio

₹ Market Value

Profit/Earnings Ratio

Earnings Per Share (EPS)

Dividend Yield Ratio


Dividend Payout Ratio

Solvency

Debt to Equity Ratio

Debt to Assets Ratio

Debt Service Coverage Ratio

Interest Coverage Ratio


Solvency Ratios
Debt-to-Equity Ratio
Total Liabilities
Debt-to-Equity Ratio =
Shareholders' Equity
Interpretation: Measures a company's financial leverage. Higher ratios
indicate more debt relative to equity, which could imply higher risk.

Debt-to-Assets Ratio
Debt-to-Assets Ratio
Debt-to-Assets Ratio =
Total Assets
Interpretation: Shows the proportion of a company's assets that are
financed by debt. Higher values suggest greater reliance on debt financing.

Debt Service Coverage Ratio (DSCR)


Operating Income
Debt Service Coverage Ratio (DSCR) =
Total Debt Service
Interpretation: Measures a company's ability to service its debt with its
operating income. Higher ratios indicate better debt servicing capability.

Interest Coverage Ratio


EBIT
Interest Coverage Ratio =
Interest Expenses
Interpretation: Assesses a company's ability to pay interest on its
outstanding debt. Higher ratios suggest better financial health and less
risk of bankruptcy.

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