Leverage ratios provide valuable insights into a company’s capital structure, debt burden, and capacity to service interest payments and principal repayments. Download our free Leverage Ratio Template and gain clarity on a company’s financial leverage.
What are Leverage Ratios?
Leverage ratios measure a company’s level of debt relative to other financial items, such as equity or total financing. This can show if debt levels are rising relative to previous years and assess whether a company is operating with an optimal equity-to-debt ratio. Ideally, a company should be using debt to fund growth within the company, without the interest repayments becoming a burden on operating performance.
Ratios will evaluate a company’s ability to support interest payments and principal repayments on its outstanding debt. Investors can gain insights into the company’s operating performance relative to its debt component. If operating performance is poor, then the debt repayment will be carefully monitored to ensure the company can continue to meet its obligations. Equally if a company is enjoying robust growth, it may be capable of taking on more debt (or cheaper debt) to facilitate future growth and capacity expansion.
Key leverage ratios include:
- Debt-to-EBITDA Ratio: analyzes the relationship between a company’s debt and its earnings before interest, taxes, depreciation, and amortization (EBITDA)
- Debt-to-Equity Ratio: calculates debt as a percentage of equity financing
- Debt-to-Capital Ratio: calculates debt as a percentage of total capital (debt plus equity)
- Interest Coverage Ratio: measures a company’s ability to service interest payments from its earnings
Get Your Free Leverage Ratio Template
Don’t miss out on this valuable resource for assessing your company’s leverage and financial health. Enter your email in the form below to download our free Leverage Ratio Template and start analyzing your leverage ratios like a pro.
Steps for Using the Leverage Ratio Template
Download the free Leverage Ratio Template.
- Input the required financial data, such as debt, equity, EBITDA, and interest expense, in the designated cells
- The template will automatically calculate the following leverage ratios:
- Debt-to-EBITDA Ratio
- Debt-to-Equity Ratio
- Debt-to-Capital Ratio
- Interest Coverage Ratio
- Review the calculated ratios and compare them against industry benchmarks or historical data
- Analyze the results to assess the company’s leverage position, debt burden, and ability to service interest payments and principal repayments
- Adjust the input data to perform scenario analysis and evaluate the impact of changes in the company’s financial position on the leverage ratios
Calculate the Leverage Ratios with Our Template
Our Leverage Ratio Template makes it easy to calculate and analyze these critical ratios for your company or potential investments. Simply input the required financial data, and the template will automatically compute the leverage ratios for you.