Financial leverage
The standard value of the financial leverage ratio for companies in our country is 1.
In this case, the volumes of borrowed and equity capital will be equal. This allows the company to grow with the least risk or without any risk at all. Depending on the specifics of the organization's activities, higher indicators (more than 2) are also encountered.
For example, for large public companies this indicator may be increased. The same applies to trading organizations.
Experts claim that the usages of car owner database difficulty of attracting additional borrowed funds will increase as the level of financial leverage increases. This is explained by the fact that a certain share of assets is already financed with borrowed resources. For example, with an indicator of 1.5, the part of the ZK is 1.5 times greater than the part of the SK and reaches 60%. At the same time, in a situation where the organization has a guaranteed income stream, this money can be used to fully pay off debts.
The effect of financial leverage
The effect of financial leverage
The standard value for this indicator is 0.5–0.7.
Therefore, the size of the ZK varies within 50-70%. When this figure becomes larger, there is an increase in the risks of insolvency and bankruptcy of the organization. If the value of this indicator is less than 50%, then we can talk about lost profits due to the lack of additional financing.
At the same time, both a positive effect (if the profitability of the funds raised is higher than their cost) and a negative one (if it is lower) are observed. At the same time, even a positive result has one drawback. The fact is that with an increase in profitability and the percentage of the ZK, the entrepreneurial risk increases.
It becomes obvious that the determination of the financial leverage indicator is performed in order to assess the economic stability and prospects for the organization. For this purpose, data is analyzed every quarter or every 6 months. This way, it is possible to identify the dynamics and adjust the financial activities of the company.