Financial Leverage Calculator

✖Total Debt is the net debt of a company minus cash on hand.ⓘ Total Debt [TD]			+10% -10%
✖Total Shareholders' equity is equal to a firm's total assets minus its total liabilities and is one of the most common metrics used by analysts to determine the financial health of a company.ⓘ Total Shareholders' Equity [TSE]			+10% -10%

✖Financial Leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing.ⓘ Financial Leverage [FL]

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Formula

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Financial Leverage

Formula

`"FL" = "TD"/"TSE"`

Example

`"2.1E^7"="2500000000"/"120"`

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Financial Leverage Solution

STEP 0: Pre-Calculation Summary

Formula Used

Financial Leverage = Total Debt/Total Shareholders' Equity
FL = TD/TSE
This formula uses 3 Variables

Variables Used

Financial Leverage - Financial Leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing.
Total Debt - Total Debt is the net debt of a company minus cash on hand.
Total Shareholders' Equity - Total Shareholders' equity is equal to a firm's total assets minus its total liabilities and is one of the most common metrics used by analysts to determine the financial health of a company.

STEP 1: Convert Input(s) to Base Unit

Total Debt: 2500000000 --> No Conversion Required
Total Shareholders' Equity: 120 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

FL = TD/TSE --> 2500000000/120

Evaluating ... ...

FL = 20833333.3333333

STEP 3: Convert Result to Output's Unit

20833333.3333333 --> No Conversion Required

FINAL ANSWER

20833333.3333333 ≈ 2.1E+7 <-- Financial Leverage

(Calculation completed in 00.004 seconds)

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Credits

Created by Aashna

IGNOU (IGNOU), India

Aashna has created this Calculator and 50+ more calculators!

Verified by Vishnu K

BMS College of Engineering (BMSCE), Bangalore

Vishnu K has verified this Calculator and 200+ more calculators!

< 4 Leverage Ratios Calculators

Degree of Financial Leverage

Go Degree of Financial Leverage = Earnings Before Interest and Taxes/(Earnings Before Interest and Taxes-Interest)

Degree of Combined Leverage

Go Degree of Combined Leverage = Degree of Operating Leverage*Degree of Financial Leverage

Degree of Operating Leverage

Go Degree of Operating Leverage = % Change in EBIT/% Change in Sales

Financial Leverage

Go Financial Leverage = Total Debt/Total Shareholders' Equity

Financial Leverage Formula

Financial Leverage = Total Debt/Total Shareholders' Equity
FL = TD/TSE

What do you mean by Financial Leverage ?

Financial Leverage is the concept of using borrowed capital as a funding source. Leverage is often used when businesses invest in themselves for expansions, acquisitions, or other growth methods. Leverage is also an investment strategy that uses borrowed money—specifically, the use of various financial instruments or borrowed capital—to increase the potential return of an investment.

How to Calculate Financial Leverage?

Financial Leverage calculator uses Financial Leverage = Total Debt/Total Shareholders' Equity to calculate the Financial Leverage, Financial Leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. Financial Leverage is denoted by FL symbol.

How to calculate Financial Leverage using this online calculator? To use this online calculator for Financial Leverage, enter Total Debt (TD) & Total Shareholders' Equity (TSE) and hit the calculate button. Here is how the Financial Leverage calculation can be explained with given input values -> 2.1E+7 = 2500000000/120.

FAQ

What is Financial Leverage?

Financial Leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing and is represented as FL = TD/TSE or Financial Leverage = Total Debt/Total Shareholders' Equity. Total Debt is the net debt of a company minus cash on hand & Total Shareholders' equity is equal to a firm's total assets minus its total liabilities and is one of the most common metrics used by analysts to determine the financial health of a company.

How to calculate Financial Leverage?

Financial Leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing is calculated using Financial Leverage = Total Debt/Total Shareholders' Equity. To calculate Financial Leverage, you need Total Debt (TD) & Total Shareholders' Equity (TSE). With our tool, you need to enter the respective value for Total Debt & Total Shareholders' Equity and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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