Leverage Ratios

times interest earned formula

[profit before taxes + interest charges]/ interest charges; indicates the ability of the company to meet its annual interest costs

coverage of fixed charges

[profit before taxes +interest charges + lease charges]/ [interest charges + lease obligations]; a measure of the companys ability to meet all of its fixed charge obligations

current liabilities to equity formula

current liabilities/ shareholders equity; measures the short term financing portion versus that provided by owners

what are 6 leverage ratios?

debt to asset ratio, debt to equity ratio, long term debt to capital structure, times interest earned, coverage on fixed charges, current liabilities on equity

long term debt to capital structure formula

long term debt/ shareholders equity; measures the long term component of capital structure

debt to asset ratio formula

total debt/ total assets; measures the extent to which borrowed funds have been used to finance the companys assets

debt to equity ratio formula

total debt/shareholders equity; measures the funds provided by creditors vs the funds provided my owners