Financial leverage ratios deliver a sign of the long-standing creditworthiness of the company. These ratios rely on the arrangement of long-standing agreements and on the grouping of some articles as long-standing debt or equity. Contrasting liquidity ratios that are focused on short-range assets and liabilities, financial leverage ratios evaluate the amount to which the business is utilizing long-standing debt.
Total debt to total asset ratio is a financial leverage ratio that describes the total amount of debt in relation to assets. This is a wide-ranging ratio that takes account of long-standing and short-range debt, as well as all assets. This allows assessments of financial leverage to be completed for different companies. The greater the total debt to total asset ratio, the greater the amount of leverage is and subsequently the greater the presence of financial jeopardy.
The total debt to total assets for Panera Bread for the fiscal year ending December 2014 is 0.47 compared to 0.41 for the 2013 fiscal year. This increase was generated by an increase in long-standing debt from $0 in 2013 to $100 million in 2014. This growth implies that Panera Bread is increasingly becoming more reliant on debt to develop their business.…show more content… It is computed by dividing its total liabilities by shareholders' equity. It reveals what amount of equity and debt the business is utilizing to fund its assets. A high ratio signifies high debt, which can cause unpredictable gains as an outcome of the added interest costs. If the business can increase earning by a greater amount than the interest costs, which would not have been possible without the debt, then the debt is valuable. Conversely, if the price of the debt offsets any earnings that the business produces with the debt it could become detrimental to the