Leverage Ratio
The relationship between the investment in a marketing lever and the returns it generates, used to assess efficiency.
Implications
A financial metric that measures the proportion of a company�s debt relative to its equity or assets, often used to assess the level of financial risk and the company�s ability to meet its long-term obligations, relevant in financial analysis and investment decisions.
Example
Example: A private equity firm evaluates a company�s leverage ratio before acquiring it, finding that the company has a high level of debt compared to its equity, which could pose a risk if interest rates rise or revenue declines.
Related Terms
Different from liquidity ratios, which measure a company�s ability to meet short-term obligations, leverage ratios focus on the company�s long-term financial structure and risk related to debt levels.
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