What is a Financial Leverage Formula?

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What is a Financial Leverage Formula?

What is a Financial Leverage Formula?

There are several financial leverage formulas, but the most popular is known as the Debt to Equity formula. It is calculated by adding a company's short term and long term debt, and dividing it by its total shareholders equity.

An acceptable ratio is 2 to 1, and anything higher shows the company is at risk.

Forex trading, on the other hand, can allow leverage ratios of up to 400 to 1 - which illustrates the risk inherent in these markets.

   

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