Financial Leverage

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The ROE (return on equity can be calculated as: ${\frac {NI}{S}}*{\frac {S}{TA}}*{\frac {TA}{EQ}}$

Where: $TA$ = Total Assets (which is debt + equity) $EQ$ = Total Equity $S$ = Sales $NI$ = Net Income

The ratio ${\frac {TA}{EQ}}$ is called the financial leverage

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