Financial Leverage Ratio Calculator
The Financial Leverage Ratio Calculator (equity multiplier) measures how much of a company's assets are financed by equity versus debt. Enter total assets and total equity to get the leverage ratio.
Formula
Financial Leverage Ratio = Total Assets ÷ Total Equity
- A ratio of 2.0 means each rupee of equity supports two rupees of assets.
- Higher leverage boosts returns in good times but increases risk when earnings fall.
Rs 5,000,000 assets, Rs 2,000,000 equity
Inputs
- Total Assets: 5000000 Rs
- Total Equity: 2000000 Rs
5,000,000 ÷ 2,000,000 = 2.5x, so 60% of assets are funded by debt.
Frequently asked questions
What does a high leverage ratio mean?
It means the company relies heavily on debt to finance assets, which raises both potential returns and financial risk.