LEVERAGE FINANCIAL RATIOS for Doctors

Posted on March 7, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By CFI Team and Staff Reporters

SPONSOR: http://www.MarcinkoAssociates.com

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Leverage Financial Ratios

Leverage ratios measure the amount of capital that comes from debt. In other words, leverage financial ratios are used to evaluate a company’s debt levels. Common leverage ratios include the following:

The debt ratio measures the relative amount of a company’s assets that are provided from debt:

Debt ratio = Total liabilities / Total assets

The debt to equity ratio calculates the weight of total debt and financial liabilities against shareholders’ equity:

Debt to equity ratio = Total liabilities / Shareholder’s equity

The interest coverage ratio shows how easily a company can pay its interest expenses:

Interest coverage ratio = Operating income / Interest expenses

The debt service coverage ratio reveals how easily a company can pay its debt obligations:

Debt service coverage ratio = Operating income / Total debt service

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About LOW Debt to Equity Ratios

Posted on June 12, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

WHAT AND WHY?

Low Debt / Equity Ratios

What? – Debt to Equity displays the financial leverage a company takes on to grow and support their operations. – It gives investors a glimpse if a company is raising capital through debt products more than they are using equity provided by investors.

Why? – If a company is highly leverage (i.e., having copious amounts of debt) then they are more susceptible to risk to their operations if any economic downturn occurs of if interests’ rates increase. Yet, they can grow at a faster pace and use the capital provided by investors on other growth projects.

If a company is uses equity, then they are less susceptible to risk to their operations if any economic downturn occurs of if interests’ rates increase. However, they cannot grow their business as fast as a company that uses more debt.

CITE: https://www.r2library.com/Resource/Title/0826102549

Now What? Compare the stocks within this list to equally sized stocks within a similar industry sector.

For example, Compare Small Cap tech stocks with one another. Determine if they are trying to grow their business or if they are trying to save the business by lending capital to turnaround their company and avoid bankruptcy.

RELATED: https://medicalexecutivepost.com/2021/10/10/what-is-medical-practice-financial-ratio-analysis/

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