The use of financial leverage by a firm may be measured by the

1.	The use of financial leverage by a firm may be measured by the
Answer» The USE of financial leverage by a firm may be measured by the debt to asset ratio. I would also go further by giving the following explanation. A ratio greater than 1 normally shows a considerable portion of the debt is funded by assets in question . This is to say that, the company has more liabilities than assets. A high ratio also indicates that a company may be putting itself at a risk of default on its loans and this may be DANGEROUS because interest rates were to rise SUDDENLY. A ratio below 1 MEANS that a greater portion of a company's assets is funded by equity.

Answer»

The USE of financial leverage by a firm may be measured by the debt to asset ratio.

I would also go further by giving the following explanation.

A ratio greater than 1 normally shows a considerable portion of the debt is funded by assets in question . This is to say that, the company has more liabilities than assets.

A high ratio also indicates that a company may be putting itself at a risk of default on its loans and this may be DANGEROUS because interest rates were to rise SUDDENLY. A ratio below 1 MEANS that a greater portion of a company's assets is funded by equity.

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