Why should we reduce the leverage ratio of enterprises?

Leverage ratio refers to the ratio of bank capital (owner's equity) to total assets in the balance sheet, that is, leverage ratio = equity capital ÷ total assets of the enterprise. It is an indicator to measure the company's debt risk and reflects the company's repayment ability from the side. When the total assets of an enterprise remain unchanged, the higher the leverage ratio, the more corporate bank liabilities, the greater the repayment pressure and the greater the debt risk. With the expansion of business scale and related fields, the huge financing demand may gradually lead to the high leverage ratio of enterprises, and it will also bring greater debt risks today. Therefore, enterprises need to pay enough attention to this indicator and control the leverage ratio within a reasonable range.