Leverage Ratios Help company, because, studying, creates

JPSem

Hope the studying is going well..

having an issue with the Fin Leverage = avg total assets/ avg total equity.

In my undergrad we would use liabilities instead of assets because is leverage not the use of debt to further enhance your ROE

For example if a company can recieve leverage for less than there cost of debt then leverage makes sense and also creates a tax shield.

Can someone explain why the CFA uses assets in the numerator instead of LIBS