Ethics washing and Leverage: Difference between pages

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''Law - regulation - ethics.''
1. <br />
Debt divided by Debt plus Equity = D / (D + E).<br />
<br />
<b>Example</b><br />
If the amounts of debt and equity were equal then leverage under this definition would be calculated as:<br />
1 / (1 + 1) = 50%.<br />
<br />
2. <br />
The term 'leverage' is also used in a broader sense to refer to the amount of debt in a firm's financial structure.<br />
Used in this broader sense, 'leverage' means very much the same as 'gearing'. <br />
However, leverage and gearing are normally quantified by different calculations.<br />
<br />
3. <br />
To increase the level of gearing in an operational or financial structure.  The intention of leveraging is to improve expected net results.  <br />
A consequence of leveraging is normally to increase financial risk.<br />
Many financial disasters have been a consequence of leveraging up excessively in this way in earlier periods.
<br />


Ethics washing is a derogatory term for the overstatement of an organisation's ethical concerns and actions, or those of a sector.


Potentially with the effect - or intention - of delaying effective law-making and external regulation of the sector.
== See also ==
 
* [[Debt]]
 
* [[Deleverage]]
For example, if the sector were to set up panels and similar bodies in relation to its ethics, and to successfully publicise these efforts, all of this might slow down the implementation of necessary laws and effective external regulation of the sector.
* [[Gearing]]
 
* [[Leverage ratio]]
In other words - the argument goes - the issues and related protections for affected individuals and the public should be a matter of law, and not dependent on the ethical standards of the dominant actors in the market.
 
 
Examples might include the privacy of internet users.
 
The term ''ethics washing'' is derived from - and analogous with - greenwashing in relation to environmental concerns.




== See also ==
===Other links===
* [[Ethics]]
[http://www.treasurers.org/node/8012 Masterclass: Measuring financial risk, The Treasurer, July 2012]
* [[Greenwash]]
* [[Law]]
* [[Regulation]]
* [[Transparency]]
* [[Window-dressing]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Corporate_finance]]
[[Category:The_business_context]]
[[Category:Compliance_and_audit]]
[[Category:Ethics]]

Revision as of 12:12, 29 May 2015

1.
Debt divided by Debt plus Equity = D / (D + E).

Example
If the amounts of debt and equity were equal then leverage under this definition would be calculated as:
1 / (1 + 1) = 50%.

2.
The term 'leverage' is also used in a broader sense to refer to the amount of debt in a firm's financial structure.
Used in this broader sense, 'leverage' means very much the same as 'gearing'.
However, leverage and gearing are normally quantified by different calculations.

3.
To increase the level of gearing in an operational or financial structure. The intention of leveraging is to improve expected net results.
A consequence of leveraging is normally to increase financial risk.
Many financial disasters have been a consequence of leveraging up excessively in this way in earlier periods.


See also


Other links

Masterclass: Measuring financial risk, The Treasurer, July 2012

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