Debt ratio:Debt ratio = total debt/total assets-Total debt here include short-term debt and long-term debt to pay. Creditors usually prefer companies with low debt ratios because such companies have the ability to pay higher debt. In contrast, shareholders want the high debt ratio so as to increase profitability for the shareholders. However want to know this ratio should be high or low compared to the industry average debt ratio.-Lower the debt ratio, the level of protection afforded to creditors is as high in the case of businesses into bankruptcy and have to liquidate assets.-Debt ratios depends a lot of factors: type of business, the scale of business, scope of activities, the purpose of the loan.
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