Leverage and Risk KPIs measure the balance between debt and equity financing and assess the company’s ability to service obligations. They help identify financial risk exposure and capital structure strength.
| KPI Name | Formula | Description / Interpretation |
|---|---|---|
| Debt to Equity Ratio | Total Liabilities ÷ Total Equity | Shows the proportion of funding that comes from creditors versus shareholders. |
| Debt Ratio | Total Liabilities ÷ Total Assets | Indicates how much of the assets are financed through debt. |
| Equity Ratio | Total Equity ÷ Total Assets | Reflects how much of the company is funded by shareholders’ equity. |
| Interest Coverage Ratio | EBIT ÷ Interest Expense | Evaluates the ability to meet interest payments from operating income. Higher is better. |
| Net Debt to EBITDA | (Total Borrowings − Cash) ÷ EBITDA | Measures debt levels relative to operating earnings. Lower ratios imply stronger financial flexibility. |
| Gearing Ratio | Net Debt ÷ (Net Debt + Equity) | Indicates leverage position relative to total capital employed. |
Notes
- Leverage KPIs rely on accurate balance sheet classification.
- Higher debt levels increase financial risk but may enhance return potential.
- Ratios can be compared across subsidiaries for risk benchmarking.
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