The simple leverage ratio is defined as:
A) Depreciation of an asset / Value of an asset
B) Current assets / current liabilities.
C) Equity of an asset / Value of an asset
D) Value of an asset / Equity of an asset.
E) Equity of an asset / Original cost of an asset.

Question

Quizplus · Accepted Answer

The simple leverage ratio is calculated by dividing the value of an asset by the equity of that asset. This ratio helps to determine the level of leverage or debt used to finance an asset. A higher ratio indicates a higher level of leverage, which may increase the risk of default or insolvency in case of adverse events.

The Simple Leverage Ratio Is Defined As