Capitalization ratios

Capitalization ratios

Also called financial leverage ratios, these ratios compare debt to total capitalization and thus reflect the extent to which a corporation is trading on its equity. Capitalization ratios can be interpreted only in the context of the stability of industry and company earnings and cash flow.

Leverage Ratio

In risk analysis, any ratio that measures a company's leverage. One example of a gearing ratio is the long-term debt/capitalization ratio, which is calculated by taking the company's long-term debt and dividing it by its long-term debt added to its preferred and common stock. Another example is a simple debt-to-equity ratio, which is calculated by dividing total debt by total equity. Generally, companies with higher leverage as determined by a leverage ratio are thought to be more risky because they have more liabilities and less equity. A leverage ratio is also called a gearing ratio or an equity multiplier.
References in periodicals archive ?
Focusing on current capitalization ratios, without understanding the extent to which the market-oriented nature of capital has become a critical aspect of the competitive scene, can potentially weaken the industry as much as any other competitive disadvantage.
Franklin's claim paying rating is based upon its established position in traditional participating individual life and disability income products, excellent expense control, high asset quality, and continued maintenance of one of the highest statutory capitalization ratios in its size category despite regular dividend payments to American Brands.
The rating reflects the company's established position in traditional participating individual life and disability income products, excellent expense control, high asset quality, and continued maintenance of one of the highest statutory capitalization ratios in the industry.
8 billion in 2003 when the initial funding for these projects began); but that equity to capitalization ratios are projected to improve to 33% versus 30% currently as a result of maintaining solid operating margins.
The rating reflects Franklin's established position in traditional participating individual life and disability income products, excellent expense control, high asset quality, and continued maintenance of one of the highest statutory capitalization ratios in its size category despite regular dividend payments to its parent.
The robust growth registered since end-2004 surpassed the increase in CABEI's equity, though the bank still shows ample capitalization ratios.
The strengthening in balance sheet measures over the last 12-18 months is clear; non-performing assets have dropped precipitously, loan loss reserve measures have improved, and capitalization ratios have been enhanced.
As a result of its corporate bank strategy, Continental has downsized its balance sheet which has positively affected capitalization ratios.
The ratings consider Pine's track record of satisfactory profitability, adequate liquidity and capitalization ratios -- despite a history of large dividend distributions -- and a reasonably diversified loan portfolio, given its lower dependence on consignment lending compared with its local peers.
Constant capital increases, driven by its own results, capital increases from member countries and the incorporation of Spain as a shareholder in 2002 have sustained the bank's ample capitalization ratios.
The aforementioned growth has increased the leverage of the system, while lower expected profitability will not be sufficient to relieve pressure on the bank's capitalization ratios in the short and medium term.
In the past, the company's robust growth strategy caused deterioration in its capitalization ratios.