Understanding Debt Ratio and Financial Leverage
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Flashcards covering the key vocabulary and concepts related to understanding debt ratios and financial leverage in small business management.
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7 Terms
Debt Ratio
The relationship of total liabilities to total assets.
Total Liabilities
The total amount of debts or obligations that a business owes.
Total Assets
The total value of everything a business owns.
Financial Leverage
The use of borrowed funds to increase the potential return on investment.
Trend of the Ratio
The pattern of change in the debt ratio over time, indicating financial health.
Liabilities to Assets Ratio
A measure indicating how much of a company’s assets are financed by liabilities.
Monitoring for Negative Impact
The process of continuously assessing financial strategies to prevent adverse effects on the business.