Deleveraging is the process of reducing a company's or individual's debt levels relative to their equity or assets, often through debt repayment or asset sales.

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Why is deleveraging important?

Deleveraging is important because it reduces a company's or individual's financial risk by lowering debt levels, improving financial stability, and increasing resilience to economic downturns.

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An easy way to understand deleveraging is:

When a company or person reduces their debt by paying it off or selling assets, making them less reliant on borrowed money and more financially stable.

Deleverage Examples & Formulas

Examples of deleveraging include paying off debt, selling assets to reduce debt, or issuing equity to reduce debt.

Deleveraging Formula: Debt Reduction = (Current Debt - Target Debt) ÷ Current Debt

Deleveraging has been instrumental in strengthening our financial stability. By reducing our debt levels, we improved our creditworthiness, which in turn, enhanced our ability to secure more favorable credit terms in the future, thus supporting our expansion plans without overburdening our balance sheet.