How do you calculate asset leverage ratio?

Answer 1

This ratio is used to identify the financial leverage of the company i.e. to identify the degree to which the firm's activities are funded by the owners money versus the money borrowed from creditors.

The higher a company's degree of leverage, the more the company is considered risky.

Formula:

Net Debt / Equity

Answer 2

Nothing is easier than calculating the asset leverage ratio, as one only has to divide two numbers. Let's assume that a company has $2000 worth of debt meanwhile it has $8000 worth of equity. You only have to divide the 2000 by 4000, so 2000/4000 to get the ratio of 1/4 or 0.25.