Financial leverage (Leverage)
Total assets per unit of shareholders equity: the multiplier debt applies to returns.
It is exactly the factor by which return on equity exceeds return on assets, so it shows how much of a high return on equity is borrowed.
How it is computed here
Total assets / shareholders equity
Measured over the latest complete fiscal year, as filed. Filed under health. Lower is the stronger reading, other things equal.
No published threshold exists for this figure, so this page prints none. Read it against the company's own history and its peers instead.
When it misleads
- Withheld when equity is zero or negative.
- Banks operate at ten times or more by design; the number is not comparable across sectors.
Reads differently for banks, insurers: the figure is shown with that caveat attached.
Questions
How is financial leverage calculated?
Total assets / shareholders equity. Measured over the latest complete fiscal year, as filed.
What does financial leverage tell a value investor?
It is exactly the factor by which return on equity exceeds return on assets, so it shows how much of a high return on equity is borrowed.
When does financial leverage mislead?
Withheld when equity is zero or negative. Banks operate at ten times or more by design; the number is not comparable across sectors.