It 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.
Calculation formula:
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.
Extended data:
standard
1, to judge whether the asset-liability ratio is reasonable.
To judge whether the asset-liability ratio is reasonable, we must first look at whose position you stand. Asset-liability ratio reflects the ratio of debt provided by creditors to total capital, also called debt operating ratio.
2. The position of creditors
They are most concerned about the safety of the money lent to enterprises, that is, whether the principal and interest can be recovered on schedule. If the capital provided by shareholders only accounts for a small proportion of the total capital of the enterprise, the risks of the enterprise will be mainly borne by creditors, which is unfavorable to creditors.
So they hope that the lower the debt ratio, the better. If the enterprise can repay the debt, there will be no great risk in lending to the enterprise.
3. From the perspective of shareholders.
Because the funds raised by enterprises through debt play the same role as the funds provided by shareholders, shareholders are concerned about whether the profit rate of all capital exceeds the interest rate of borrowed funds, that is, the price of borrowed capital.
When the total profit rate of capital earned by an enterprise exceeds the interest rate paid for borrowing, the profits earned by shareholders will increase. On the contrary, if the profit rate of all capital used is lower than the interest rate borrowed, it will be unfavorable to shareholders, because the excess interest of borrowed capital will be made up by the profit share obtained by shareholders.
Therefore, from the standpoint of shareholders, when the total capital profit rate is higher than the loan interest rate, the greater the debt ratio, the better, and vice versa.
Shareholders of enterprises often use debt management to gain control of enterprises with limited capital and limited cost, and can obtain leverage benefits from debt management. So it is called financial leverage in financial analysis.
4, the location of the operator
If the debt is too big for creditors to bear, enterprises can't borrow money. If the enterprise does not borrow money, or the debt ratio is very small, it shows that the enterprise is timid, has insufficient confidence in the future, and has poor ability to use debt capital for business activities.
From the perspective of financial management, enterprises should assess the situation and consider comprehensively. When making a decision on borrowing capital by using the asset-liability ratio, we must fully estimate the expected profit and increased risk, weigh the gains and losses between them, and make a correct decision.
Reference: Baidu Encyclopedia-Asset-Liability Ratio