what is financial leverage 
a company s financial leverage is its total assets divided by its shareholders equity the result shows a comparison between total assets owned by the company versus shareholders ownership a high ratio indicates that a good portion of the company s assets are funded by debt 4the bottom linegearing ratios compare a company s equity to its debt the result indicates its financial leverage or how much of its operational debt is serviced via shareholders equity and or borrowed funds it s a strong measure of financial stability and something an investor should keep an eye on a high gearing ratio can raise a red flag and be risky 