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Finance
Leverage Ratio
A measure of how much debt a company is using relative to its equity or assets.
Common leverage ratios include debt-to-equity and debt-to-assets. Higher leverage can boost returns in good times but magnifies losses in bad times. The optimal level depends on the industry and interest rates.
It's the 'how much is borrowed versus owned' scorecard for a company.
Real world: A leverage ratio of 2.0 means the company has twice as much debt as equity. Banks and rating agencies watch leverage ratios closely because too much debt makes a company risky in a downturn.
💡 Leverage is a powerful accelerator — it works both ways.