The Financial Structure category examines the Financial Structure of your company — its relationship between Debt and Equity. Leverage is defined as:

Leverage = Total Assets / Total Equity

You earn points based upon your Leverage as follows:

Leverage Points

1.0 to 1.3	No Points
1.31 to 1.8	50 Points
1.81 to 2.8	100 Points
2.81 to 3.3	50 Points
3.31+	No Points

At basic level, Financial Structure addresses two questions:

• Who is taking the risks?
• Who gets the wealth created by the company?

All stakeholders are keenly concerned with these questions, and as a consequence, responses often take on a political character as stakeholders compete for their share of the wealth being created. Because risk and reward are linked, there is even competition among the stakeholders for the risk. For example, bankers want to loan money, bondholders want to buy bonds, and stockholders want to buy stock issues.