Financial Leverage Overview
Why Financial Leverage Increases Risk
How Financial Leverage Amplifies Financial Returns
Debt-to-Equity Ratio
Asset Multiplier
Times Interest Earned Ratio
Solvency
Liquidity Overview
Net Working Capital
Current Ratio
Quick Ratio
Factoring Receivables
Cash Ratio
Course Review
Course Quiz
Course Description
In the ninth lesson of our "Accounting 101" series, “Leverage and Liquidity,” you will learn how to extract data from the balance sheet to assess a company’s current and long-term health, stepping into the role of a financial analyst. You will learn to evaluate a company's short-term and long-term financial health. You will explore two types of leverage: operating leverage, related to cost structure, and financial leverage, linked to capital structure. Both increase potential rewards and risks based on business performance. Additionally, you will differentiate between liquidity in finance—referring to the ease of buying or selling assets—and liquidity in accounting, which pertains to a company's ability to meet its obligations. By the end, you will understand how to assess the risks and determine if a business has a healthy balance sheet for sustainable operations.
By the end of this course, you will able to answer questions such as:
• How does financial leverage “amplify” the financial results of a business?
• How is net working capital calculated and what does it reveal about a business’s operations?
• What are the steps that a business can take to remedy an oncoming liquidity shortfall?
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Key Skills
Financial Leverage
Operating Leverage
Financial Risk
Business Risk
Debt-to-Equity Ratio
Equity Multiplier
Times Interest Earned Ratio
Interest Coverage
Debt Service
Interest Expense
Liquidity
Asset Sales
Going Concern
Solvency
Insolvency
Financial Statements
Net Working Capital
Current Ratio
Quick Ratio
Acid-Test Ratio
Cash Ratio
Factoring Receivables
