What Is a Leverage Ratio?

The leverage ratio is the ratio of debt to equity in a company, bank, house, etc.
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[@fredla1572]

One of the best learning videos I have ever seen. Very relaxing but still informative and good to understand.

[@tinnguyen2219]

Thank you so much for sharing this useful data! Greatly appreciated.

[@andriasuderman6611]

the most helpful video i have found! thank you

[@palmaguinee5169]

Best tutorial ever for this ratio

[@abdu_jilani]

Great explanation

[@prashanthmanala2067]

You cracked it man

[@AliKhan-fs3rm]

Good vid y’all

[@teddyperera8531]

best explanation

[@pradeepdash6817]

Great example

[@akki_studymantra]

Good explaination . Thanx.

[@MasticinaAkicta]

I know someone who got a condo around 2008 ... about 12 years later did a bankruptcy and pushed the condo on the then current loan holding bank. The value of said house has gone down from 2008ish 110k to ... 60k ish :! Yeah, so they now have gotten their hands back on the condo, can fix it up and sell it off. And will try to get the 50k in difference. And since bankruptcies are public I have seen some of those financials. He hadn't paid off much at all! Only paid the least! We can do the math here... he is about out for 50k while having a shot Credit Rating! The worst, he was doing pretty well... at least from the outside it looked that way. He made some good money, so why didn't he pay off more?

[@valentinoagazzimandozzi8321]

thank you a lot

[@vineetkumarpandey3003]

How can debt and asset both keep increasing along with increasing leverage in the lehman brothers example.. shouldn't debt increase more than asset value ?

[@melkete9394]

Yes

[@ajsaifi7939]

👍

[@vess6934]

Oh dear god, please forbid banks from losing money!

[@vineetkumarpandey3003]

Why will the price of the home drop ? Just a second ago, you gave an example of house price appreciating while calculating increasing cushion. Then why give example of price depreciation when explaining leverage ? Makes it so hard to understand

[@sebek0311]

Something isn't clear for me after watching this video. If I have a morgage for a house of $50000 and I paid only $5000 my laverage is 1:10. So now house's price drops to $40000 that means that I am $5000 underwater. And how this is bad? Houses are bought for a long term even if the price goes down to $40000 it is likely to rise again and surpass the initial $50000 (assuming that there are more people on the planet and less houses to buy) - therefore how this short term laverage affect me in a negative way with the perspective for the next 20 years?

[@nirushanraj5697]

usually people have a short term vision. When they prices declining, they prefer to foreclose rather than make payments for a overpriced house in a declining market. A lot of finance has to do with human behaviour which is difficult to quantify

[@servantofthelord8147]

Wait, but isn't this Loan-to-Value ratio instead of leverage ratio?

[@jzk2020]

What's a good leverage ratio? 10?

[@lucjanl1262]

0

[@vanguardas9927]

as a trader i'd say 3 or lower...maximum of 6....leverage over 6 is practically gambling

[@samjoshi1812]

why does high leverage lead to higher profits?

[@abdu_jilani]

Cuz high leverage = higher money you have to buy with = bigger investment/House = Bigger Appreciation of that House

[@patrickbuxenkoter1802]

Like in the example you buy a house for 100k and you invest 10k of your own money and 90k of the banks money. When the value of the house rises by 20000, your debts remain the same, while your own invested moneys value rises from 10000 to 30000. That's the positive effect. Otherwise by dropping value you bleed much worse. Edit: if you have bought a sth for 50k with the same own investment and return ratio, you would have got 20% of 50k, wich would mean a rise of "only" 10k of your invested sum.

[@samnguyenthi3092]

Subtitle, please 😔

[@MarginalRevolutionUniversity]

Which language? -Roman

[@thaomai1782]

Vietnamese please

[@FlamingBasketballClub]

Second

[@d.i.713]

Those numbers given mean nothing to the viewer if you dont explain WHAT the numbers represent.ie...the scale for the ratio...how do we know what 30 is or 20? How give no explanation. Is it based on a 0-100 scale??

[@youtubeaccount1718]

Yikes pretty obvious higher number higher debt to equity ratio

[@Programmer6665]

First!!

[@musicstewart9744]

Lehman Brothers= the irrationality of greed.

[@Frank-dt6dp]

Not really tho. I think that their actions were quite rational! It's more that, the incentives they had were irrational.

[@rohitgupta7339]

Lol

[@jakobpetrik72]

minecraft ahh video lmaooo

[@palmaguinee5169]

Best tutorial ever for this ratio

[@kanedario7639]

you probably dont give a shit but if you are stoned like me atm you can stream pretty much all of the new movies on InstaFlixxer. Have been binge watching with my gf for the last weeks :)

[@oakleyanderson4112]

@Kane Dario yea, have been watching on InstaFlixxer for years myself =)

[@roninlennox2688]

@Kane Dario Definitely, I've been watching on instaflixxer for since november myself :D