Leverage Ratios
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Times interest earned
Leverage ratio = profit before interest and tax / total interest charges measure of how much profits can decline and still meet interest obligations. should be above 1.
Debt to assets
Leverage ratio = total debt / total assets measure of extent to which debt has financed activities. higher = higher risk of bankruptcy.
Debt to equity
Leverage ratio = total debt / total equity measure of use of debt vs equity to finance activities. Generally recommended less than 1
