Asset-liability ratio = total liabilities/total assets × 100%?
1. Total liabilities: refers to the sum of various liabilities undertaken by the company, including current liabilities and long-term liabilities.
2. Total assets: refers to the sum of all assets owned by the company, including current assets and long-term assets.
Debt ratio is the percentage of total liabilities divided by total assets at the end of the period, that is, the proportional relationship between total liabilities and total assets. The asset-liability ratio reflects how much of the total assets are financed by borrowing, and can also measure the extent to which enterprises protect the interests of creditors in the liquidation process. Asset-liability ratio reflects the proportion of capital provided by creditors to total capital, also called debt operating ratio. Asset-liability ratio = total liabilities/total assets.
It indicates how much of the company's total assets are raised through debt, which is a comprehensive index to evaluate the company's debt level. At the same time, it is also an index to measure the company's ability to use creditors' funds for business activities, and also reflects the security of creditors' loans.
If the asset-liability ratio reaches 100% or exceeds 100%, the company has no net assets or is insolvent.