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.
If the asset-liability ratio reaches 100% or exceeds 100%, the company has no net assets or is insolvent.
Extended data:
Asset-liability ratio is an important symbol to measure the debt level and risk degree of enterprises. It contains the following meanings:
(1) The asset-liability ratio can reveal how much of all sources of funds of an enterprise are provided by creditors.
② From the creditor's point of view, the lower the asset-liability ratio, the better.
③ For investors or shareholders, higher debt ratio may bring some benefits. (financial leverage, pre-tax deduction of interest, gaining control of the enterprise with less capital (or equity) investment).
(4) From the operator's point of view, what they are most concerned about is to make full use of the borrowed funds to bring benefits to the enterprise and reduce financial risks as much as possible.
⑤ The debt ratio of enterprises should be as high as possible, and there will be no debt repayment crisis.
The higher the ratio of current assets, the safer the creditors are. However, if the current ratio is too high, some funds will be stranded in the form of current assets, which will affect the profitability of enterprises.
Therefore, enterprises should determine a reasonable boundary of current ratio. Below this limit, it shows that the asset-liability ratio may be high, the credit of enterprises will be damaged, and it is difficult to borrow money again. Exceeding this limit shows that some funds are idle, and the efficiency of fund use is not high, resulting in a waste of funds.
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