Leverage Ratio


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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 ?
In addition (the banks) are required to disclose their leverage ratio in their published balance sheets and annual reports," the BSP said.
The FPC will not set a new minimum level for the leverage ratio in that review and has not said when it will.
The leverage ratio is an important backstop to the risk-based capital regime and, when coupled with the LCR and NSFR, provides a regulatory framework that should help to ensure that banks are much more resilient to financial shocks than was the case in the past.
I also think that the UK should apply the international standard for the level of the baseline leverage ratio, in line with the final Basel definition and calibration.
Nationwide chief executive Graham Beale told the Financial Times at the weekend the leverage ratio is an "unsophisticated measure which ignores the quality of an organisation's assets or its business model".
A separate central bank statement has earlier said stronger bank leverage ratios are "important for the establishment and sustainability of financial stability.
The company's leverage ratio (a method used to calculate a company's ability to meet its financial obligations) was at 35 percent in June of 2012 compared to 32 percent in 2011.
In addition to the leverage ratio, banks are also required to maintain certain levels of tier I and tier II capital relative to risk-weighted assets.
Cal Dive added that it will temporarily increase its permitted maximum consolidated debt to EBITDA leverage ratio, lower the quarterly term loan amortisation, allow transfer of diving vessels Eclipse and Texas to a subsidiary thus releasing them as collateral under the credit agreement by amending its credit facility.
Journal Register said it has amended its credit agreement with its lenders led by JPMorgan Chase Bank, lowering its borrowing limit to $150,000 from $200,000 and increasing the leverage ratios it will be allowed to maintain.
Conversely, CFOs may wish to take on more debt as a result of the improved leverage ratio, and use the proceeds to profitability reinvest in other parts of the business.
The ratings and outlook reflect Kingstone's adequate capitalization, favorable operating performance, moderate investment leverage ratios and local market knowledge in New York.