Long-term assets occupied by equity ratio
factor.formula
Long-term assets to equity ratio = (Total assets - Current assets) / Shareholders' equity
This formula calculates the ratio of a company's long-term assets to its equity, and is explained below:
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Total assets, including current and noncurrent assets, at the end of the most recent reporting period represent all economic resources controlled by the enterprise.
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Total current assets at the end of the most recent reporting period refer to assets that can be converted into cash or consumed within a normal operating cycle (usually one year), such as cash, short-term investments, accounts receivable, inventory, etc.
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Total shareholders' equity at the end of the most recent reporting period represents the residual interest enjoyed by the owners of the enterprise in the assets of the enterprise, including paid-in capital, capital reserves, surplus reserves and retained earnings. Shareholders' equity is the most basic self-owned capital of the enterprise.
factor.explanation
The equity ratio of long-term assets reflects the degree to which a company's own capital is allocated to long-term assets. The higher the ratio, the more the company has invested its own capital in long-term assets with poor liquidity, the slower the capital turnover rate, and the greater liquidity risk and financial pressure it may face. On the contrary, a lower ratio means that the company's own capital is more used in short-term assets with good liquidity or funds that can be used at any time, the capital is more flexible, and the ability to resist risks may be stronger. This indicator is often used to measure the robustness of a company's capital structure and its long-term operating capabilities, and may also be used as a reference for judging a company's financial risks.