Among them, the total liabilities refer to the sum of various liabilities undertaken by the company, including current liabilities and long-term liabilities; Total assets refer to the sum of all assets owned by the company, including current assets and long-term assets.
Debt ratio is the ratio of all liabilities to all sources of funds, which indicates the proportion of corporate liabilities to all funds. Debt ratio refers to the relationship between debt and assets and net assets, which reflects the ability of enterprises to repay the principal and interest of debts.
Indicator analysis:
First, when the ratio rises or is higher.
1. Advantages: the production and operation funds of enterprises are increased, the sources of funds of enterprises are increased, the level of utilization of external funds by enterprises' own funds is improved, and the potential of their own funds is further exerted.
2. Disadvantages: the cost of capital increases, long-term liabilities increase, interest expenses increase, and enterprise risks increase. Once an enterprise falls into operational difficulties, such as uncollectible payment for goods and insufficient liquidity, long-term liabilities become the burden of the enterprise.
Second, when the ratio decreases or is low.
1. Advantages: strong enterprise independence and good long-term capital stability.
2. Disadvantages: the profit rate of enterprise products is low, the profit rate of enterprise products is high, the profit rate of enterprise's own funds is greater than the bank interest rate, the enterprise does not make full use of external funds to create profits for the enterprise, and there may be problems such as high current liabilities and unstable capital structure in the process of enterprise production and operation.
The lower the ratio, the better. Because the owners (shareholders) of the company generally only bear limited liability, once the company goes bankrupt and liquidates, the realized income of the assets is likely to be lower than its book value.
So if this index is too high, creditors may suffer losses. When the asset-liability ratio is greater than 100%, it means that the company is insolvent, which is very risky for creditors.
The asset-liability ratio reflects the proportion of funds provided by creditors to all funds, and the degree of protection of enterprise assets to creditors' rights. The lower the ratio (below 50%), the stronger the solvency of the enterprise.