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Financial Leverage

Financial Leverage = Total Debt/ Shareholders Equity or  Avg Total Assets/Avg Total Equity. Which one to use and what’s the difference ? 

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Financial Leverage is Assets/Equity.  The other is Debt to Equity.   They’re related, since A/E = 1 + D/E.

The Financial Leverage ratio (called the Equity Multiplier almost everywhere that’s NOT the CFA curriculum) typically shows up in the Dupont Ratios:  

ROE = ROA x Leverage Ratio  

or 

ROE = Net Profit Margin x Total Asset turnover x Leverage Ratio.  

You keep using that word.  I do not think it means what you think it means.

Thanks a lot. :) 

Glad it was helpful. 

You keep using that word.  I do not think it means what you think it means.