Calculating Leverage Financial Statement Analysis

Introduction & Importance

Calculating leverage through financial statement analysis is crucial for understanding a company’s financial health and risk. It measures the extent to which a company is funded by debt versus equity.

How to Use This Calculator

1. Enter the total assets and total liabilities from the company’s balance sheet.
2. Click ‘Calculate’.
3. View the results and chart below.

Formula & Methodology

The leverage ratio is calculated as:

Leverage Ratio = Total Liabilities / Total Assets

This calculator uses this formula to determine the company’s leverage.

Real-World Examples

Data & Statistics

Leverage Ratios of S&P 500 Companies (2020)

Industry	Average Leverage Ratio

Leverage Ratios of Fortune 500 Companies (2020)

Industry	Average Leverage Ratio

Expert Tips

• Higher leverage ratios indicate higher risk, but also higher potential returns.
• Compare a company’s leverage ratio to its industry average to understand its risk profile.
• Monitor changes in the leverage ratio over time to track a company’s financial health.

Interactive FAQ

What is a good leverage ratio?

A good leverage ratio depends on the industry and the company’s specific situation. Generally, lower ratios indicate less risk.

Learn more about leverage from the SEC

Understand leverage from Investopedia