What measures are used in a leverage ratio for total capitalization?
What will be an ideal response?
In addition to the ratio of total debt to total capitalization, two other ratios are commonly used in assessing a company's leverage: (1) total debt to EBITDA and (2) total debt to EBIT. In calculating a leverage ratio for total capitalization, it is common to use the company's capitalization structure as stated in the most recent balance sheet. To supplement this measure, the analyst should calculate capitalization using a market approximation for the value of the common stock.
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