Financial ratios are financial metrics that determine relationships between aspects of a company’s operations and financial position. The next course in this series on financial ratios is focused on leverage ratios. Leverage is created through various situations including when: • A company takes on debt to purchase specific assets. • A company borrows money based on the overall creditworthiness of the business. • A company borrows money to finance an acquisition. • A private equity firm (or other company) does a leveraged buyout. • An individual works with options, futures, margins or other financial instruments. Equity investors borrow money to leverage their investment portfolio. A leverage ratio looks at how much capital comes in the form of debt (loans) or assesses the ability of a company to meet its financial obligations. The leverage ratio is important given that companies rely on a mixture of equity and debt to finance their operations. This course focuses on various leverage ratios, their purpose, calculation, and meaning.