# Financial Leverage Ratio Calculator

URL: https://speedycalculator.com/calculators/finance/financial-leverage-ratio/
Last updated: 2026-10-25

> The financial leverage ratio calculator works out the equity multiplier (total assets ÷ equity) and related leverage ratios – debt-to-equity and debt-to-assets – and the degree of financial leverage.

## Inputs

- Total assets
- Total debt
- Shareholders' equity
- EBIT
- Interest expense

## Results

- Equity multiplier
- Debt-to-equity
- Debt-to-assets
- Degree of financial leverage

## Formula

```
Equity multiplier = total assets ÷ shareholders' equity
Debt-to-equity = total debt ÷ equity
Degree of financial leverage = EBIT ÷ (EBIT − interest)
```

## Explanation

Leverage magnifies returns on equity in good times and losses in bad times. The equity multiplier is one of the three parts of the DuPont ROE breakdown.

### How to use the Financial Leverage Ratio Calculator

- **Total assets**
- **Total debt**
- **Shareholders' equity**
- **EBIT**
- **Interest expense**

Results update as you type, and every field accepts the units shown in its menu.

### How it works

Enter total assets, total debt, shareholders' equity, EBIT and interest expense.

### Tips

- Use consistent periods (a year or a quarter) for flow figures and period-end values for balances.
- Average opening and closing balances when a ratio mixes a flow with a stock.
- Benchmark against competitors in the same industry.
- Read the ratio together with others – profitability, liquidity and efficiency tell different stories.

### Common mistakes to avoid

- Using sales instead of cost of goods sold for inventory ratios.
- Mixing gross, operating and net profit.
- Ignoring one-off items that distort a single year.

### Inputs explained

FieldWhat to enterTotal assetsAmount in your currencyTotal debtAmount in your currencyShareholders' equityAmount in your currencyEBITAmount in your currencyInterest expenseAmount in your currency

### What each result means

- **Equity multiplier** = [Total assets]÷[Shareholders' equity]
- **Debt-to-equity** = [Total debt]÷[Shareholders' equity]
- **Debt-to-assets** = [Total debt]÷[Total assets]
- **Degree of financial leverage** = [EBIT]÷([EBIT] - [Interest expense])

### Example values

How the main result changes when **Total assets** changes and everything else stays at the example values above:

Total assetsEquity multiplier1,000,0001.111,500,0001.672,000,0002.222,500,0002.783,000,0003.334,000,0004.44

## Worked example

Inputs — Total assets: $2,000,000; Total debt: $800,000; Shareholders' equity: $900,000; EBIT: $250,000; Interest expense: $50,000.

Results — **Equity multiplier = 2.22**; Debt-to-equity = 0.89; Debt-to-assets = 0.4; Degree of financial leverage = 1.25.

## FAQ

**What is a good financial leverage ratio?**
It varies by industry; an equity multiplier of 2 or less is often considered conservative.

**What does a high equity multiplier mean?**
More assets are financed with debt.

**What is the degree of financial leverage?**
The % change in EPS for a 1% change in EBIT.

**What formula does the Financial Leverage Ratio Calculator use?**
Equity multiplier = total assets ÷ shareholders' equity.


## Sources

- [Corporate Finance Institute – financial ratios](https://corporatefinanceinstitute.com/)