Ratio Analysis at NSL

II. Leverage Ratios

Leverage ratios are also known as capital structure ratio. These ratios indicate
mix of funds provided by owners & lenders. As a general rule these should be appropriate
mix debt & owners equity in financing the firm’s assets.
Leverage ratios are calculated to judge the long long-term financial position of
the company. Some of the popular leverage ratios are:

a. Debt-Equity Ratio
Debt-Equity ratio shows the relative contribution of creditors and owners. Debt-
Equity also known as External-Internal equity ratio. It is calculated to measure the
relative claims of outsiders against firm assets.

Debt-Equity Ratio = Total Debt

Net Worth
TABLE-2.1 Debt Equity Ratio

Year Total Debt Net Worth Ratio

2004-05 554110249 43052429 0.61

2005-06 499246293 63171947 0.62

2006-07 547168647 568828076 0.52

2007-08 565092766 570188858 0.82

2008-09 627397167 571266087 0.93

DEBT EQUITY RATIO

1
0.9
0.8
0.7
0.6
RATIO

0.5 0.93 Ratio

0.4 0.82
0.3 0.61 0.62
0.52
0.2
0.1
0
2004-05 2005-06 2006-07 2007-08 2008-09
YEAR

BABASAB PATIL 52