This formula would include minority interest and preferred shares in the denominator. This ratio indicates that the higher the degree of financial leverage, the more volatile earnings will be.

Mullins, David W., Jr. "Financial Leverage, the Capital Asset Pricing Model and the Cost of Equity Capital." Harvard Business School Background Note 280-100, March 1980. (Revised October 1980.) ...

Today, the premise of the Trade-off Theory is the foundation that corporate management should use to determine the optimal capital structure for a company. Impact of Financial Leverage on ...