What is the equity ratio? Many people must have heard of the property right ratio, but they don't quite understand what it means. In fact, the property right ratio is a high-risk and high reward financial structure. Let's work with Xiaobian to understand what the property right ratio is
1、 What is the equity ratio
1. The equity ratio is the ratio of total liabilities to total owner's equity. It refers to the ratio of total liabilities to total owner's equity of joint-stock enterprises. It is an index to evaluate the rationality of capital structure.
2. Take XYZ company as an example
The equity ratio of XYZ company is:
Equity ratio
Equity ratio
Equity ratio at the beginning of the year = (1100 + 2900) & divide; 4400× 100% = 90.91% year-end equity ratio = (1500 + 3800) & divide; 4700× 100%=112.77%
It can be seen from the calculation that the property right ratio of XYZ company at the beginning of the year is not very high, but the property right ratio at the end of the year is high, indicating that the debt operation degree of the company at the end of the year is high and the financial structure is not very stable.
2、 How reasonable is the property right ratio
The equity ratio is the ratio of total liabilities to total owner's equity. The general standard value is 1.2.
3、 What does the ratio of property rights represent
1. It measures whether the financial structure of the enterprise is stable and the proportion of the company's capital sources, and reflects whether the internal financial structure of the enterprise is stable from the side.
2. The higher the property right ratio, the weaker the ability of enterprises to repay long-term debt; The lower the equity ratio, the stronger the enterprise's ability to repay long-term debt, which directly reflects whether the company may be able to afford debt in the future.
3. It is used to show the relative relationship between the sources of funds provided by creditors and investors. It generally also reflects whether the company is going downhill and whether shareholders are willing to invest money, indicating whether the company has the ability to bring better benefits to shareholders.
4. Combined with the specific analysis of the company's situation, it can be seen from the property right ratio whether the company can afford this debt in a long time and maintain the stable operation of the company.