Accounting raio---Debt ratio

2007-03-20 7:54 am
URGENT!!!!!!!!!!!!!

if the total equity of the company is negative figure( include shareholder fund + a huge accumulated loss), the debt ratio will become negative too. how can we interpute that ratio?

回答 (1)

2007-03-20 10:18 pm
✔ 最佳答案
The companies with negative debt/equity ratios means that they have negative equity (as there is no negative debt in such ratio.) There is problem of going concern. What the most important is to be survival and turn into profit or at least breakeven. The ratio is not so meaningful. You can just look how large the negative equity.


Extra answer
Generally, debt-to-equity ratios, and specifically long-term debt/equity ratios, measure a firm’s borrowing capacity. The heavier its debt load, the more earnings must be used to pay it down instead of on growing the business.

Additionally, the lower the (positive) debt/equity number, the wider the margin of protection to business operations. For these reasons, creditors and risk-adverse multinational enterprise customers like low ratios, assuming positive equity.


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