Leverage Ratios

Leverage ratios measures the extent the firm is financed by other people's money. The long-term debt measures are generally consider to be the most import since this indicates the amount that is committed to the long term. Remember that all creditors must be reimbursed before the firm is able to distribute funds to the stockholders. Accordingly, both investors and lenders will examine these ratios in detail for information on the health of the firm.