Target Leverage Ratio

Target Leverage Ratio

The ratio of the market value of debt to the total market value of the firm that management seeks to maintain.

Target Leverage Ratio

The level of debt that a company wishes to maintain expressed as a percentage of its market value. Some companies are more comfortable with debt than others. Increased leverage increases the risk to a company, but can increase returns.
References in periodicals archive ?
- Continue to target Leverage Ratio (net debt: proforma EBITDA) to be below 4.0x at the end of 2019.
Further, the Company is well positioned to achieve its target leverage ratio of below 1.0x, although now expecting this sooner than 2021 as originally planned.
--Material deviation from management's target leverage ratio resulting in mid-cycle debt/EBITDA of over 2.5x on a sustained basis;
While each firm and each business unit within the firm may have its own approach for appraising how much additional equity should be raised, Table 5 computes representative capital charges associated with different levels of the target leverage ratio. As the table shows, the largest capital charge stems from the cash bond leg of the trade, since the capital charged is based on the entire notional amount financed rather than net repo liability.
O'Reilly Automotive announced the completion of its previously announced leadership succession plan and updated the target leverage ratio as part of its long-term capital structure.
where [D.sub.i,t] is firm i's outstanding debt at time t, [A.sub.i,t] is the firm's book assets at time t, [Lev.sub.i,t] is the leverage ratio (long-term debt plus short-term debt to total assets) at time t, [Lev.sub.i,t-1] is lagged leverage, and [Lev (*).sub.i,t] is the estimated target leverage ratio given firm characteristics at t - 1.
Target leverage ratio will be estimated analysing annual panel data of companies i Western Europe covering period from 2003 to 2010.
Given today's news, this transaction will occur 3+ months early, which means a) the $3B retirement of CBS shares will happen in Q3 instead of Q4 (leading to higher EPS) and b) CBS could announce a 2.75-3.0x target leverage ratio earlier than anticipated.
For example, the dramatic developments from 2007 to 2009 could have induced households to lower their target leverage ratio.
Even if firms do not work with a target leverage ratio, however, the lagged dependent variable is important to control for the time persistence of this variable.
Claiming that gearing is very closely related to the tangibility of assets and the volatility of a firm's earnings, they concluded that Swiss firms tend to maintain target leverage ratio. The findings of Drobetz and Fix are vigorously applicable to many alternate estimation techniques.
The deal improves Premier's earnings-to-debt ratio and means it is now likely to hit its target leverage ratio two years ahead of schedule.