I have a quick question on leverage. I kind of see different calcualtions between the CFAI books and the Schweser notes.I am familiar with the DuPont ROE etc.
So the CFAI book says: Financial Leverage= Assets/ Equity
I was going over the financial reporting on intercompany investments (comparing the ratios for proportionate conslodidateion, aquisition and equity method) and saw the following leverage calcualtion:
Leverage=Liabilities/Equity.
So which on is right when we mean leverage in a normal (average) term.
Can you guys help me with this?
Thanks! |