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Friday, August 5, 2011

Borrowing Ratio Calculation

Definition: Borrowing ratio shows total debt as a percentage of long-term capital (net worth). The higher the ratio, the greater risk will be associated with the firm because the company is burdened with higher borrowings. In other words, more profits of the company will be creamed off to pay the interest on debts and this may mean less profit for equity shareholders. The ratio can be calculate


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