Debt to Equity Ratio

Debt to Equity ratio is the numerical value associated with all debt divided by the value of the equity section on the balance sheet. Most prudent investors are more concerned with a limited perspective of just the long-term debt against the entire equity.

Debt Ratio

Debt is a natural part of business.   The most volume (number of transactions) of debt occurs with the simple purchase of materials (inventory) or supplies on account.   Every business buys on account whether it is a traditional vendor account like that found in retail or simply using a credit card.   A third party provides credit …

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Interest Coverage Ratio

The last of the leverage ratios isn’t really a pure leverage indicator but augments the debt ratio.  Debt requires the payment of interest and so an indicator of the ability to pay this interest is needed.  This is the interest coverage ratio.  It basically identifies how many times earnings can pay the interest required by existing debt.  The …

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