Financial Leverage

The ratio of total assets divided by equity. When a firm has no liabilities (debt), then its financial leverage is 1.0, because all the assets are accounted for as equity. Stated alternatively, for each $1 of equity the firm has, the firm also has $1 of assets. A financial leverage of 1.0 means the firm is not financially leveraged at all, or it does not use debt to finance assets.