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Financial Intelligence, Revised Edition
book

Financial Intelligence, Revised Edition

by Karen Berman, Joe Knight, John Case
January 2013
Beginner content levelBeginner
272 pages
6h 32m
English
Harvard Business Review Press
Audiobook available
Content preview from Financial Intelligence, Revised Edition

22

Leverage Ratios

The Balancing Act

Leverage ratios let you see how—and how extensively—a company uses debt. Debt is a loaded word for many people: it conjures up images of credit cards, interest payments, an enterprise in hock to the bank. But consider the analogy with home ownership. As long as a family takes on a mortgage it can afford, debt allows the family to live in a house that it might otherwise never be able to own. What’s more, homeowners can deduct the interest paid on the debt from their taxable income, making it even cheaper to own that house. So it is with a business: debt allows a company to grow beyond what its invested capital alone would allow, and indeed to earn profits that expand its equity base. A business can also deduct ...

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Publisher Resources

ISBN: 9781422144121