Debt to tangible net worth ratio
factor.formula
Debt to Tangible Net Worth Ratio =
Tangible Net Worth =
This indicator measures the extent to which a company uses debt to operate by calculating the ratio of total liabilities to tangible net worth. Tangible net worth excludes assets with poor liquidity and potentially inflated values, making this ratio more reflective of the company's actual debt repayment ability and financial risk. Among them:
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Refers to the total amount of liabilities in the company's balance sheet, including short-term liabilities and long-term liabilities. It reflects the total amount of debt that the company needs to repay and is an important factor in assessing the company's financial risk.
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Refers to the equity attributable to the parent company's shareholders after deducting non-liquid or uncertain assets such as intangible assets, development expenses, goodwill, long-term deferred expenses and deferred income tax assets. It better reflects the equity capital that can actually be used for debt repayment by the company, eliminating factors that may overestimate the actual value of the company.
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Refers to the portion of equity in a company's balance sheet that belongs to the parent company's shareholders, representing the shareholders' residual interest in the company's assets.
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Refers to assets owned by an enterprise but without physical form, such as patents, trademarks, etc. Its value assessment may be subjective.
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It refers to the expenditure incurred by an enterprise in developing new products or technologies. Before it becomes an asset, its value has a certain degree of uncertainty.
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It refers to the portion of the payment made by an enterprise when acquiring other enterprises that exceeds the fair value of the net assets of the acquired enterprise. Its value assessment is subjective and uncertain to a certain extent.
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Refers to the expenses that have already occurred but the amortization period exceeds one year, such as renovation expenses. Its value may decrease over time.
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It refers to the assets that can be used to offset future income tax due to deductible temporary differences, and its value depends on the future profitability of the company.
factor.explanation
The tangible net worth debt ratio is an important financial leverage indicator used to assess a company's financial risk and debt repayment ability. The higher the ratio, the more the company uses debt financing and the greater the financial risk. In addition, a higher tangible net worth debt ratio may also indicate that the company's future debt repayment ability is weaker and it may be more likely to encounter operating difficulties under financial pressure. On the contrary, a lower ratio indicates that the company has a sound financial structure and strong debt repayment ability. In industry comparisons, this indicator can assist in assessing the company's financial health and risk level. In quantitative investment, this factor is often used for risk control and value mining.