The smaller the index value, the lo

The smaller the index value, the lower the capitalization degree of the company's liabilities and the lower the long-term debt repayment pressure; on the contrary, the higher the capitalization degree of the company's liabilities and the higher the long-term debt repayment pressure. This indicator is mainly used to reflect the proportion of long-term interest bearing liabilities to the total long-term working capital of an enterprise. Therefore, this indicator should not be too high. Generally, it should be less than 20%.Analysis pointsGenerally speaking, the analysis of long-term debt ratio should grasp the following two points:1. Compared with current liabilities, long-term liabilities are relatively stable and will be paid off after several accounting years in the future. Therefore, the company will not face a great risk of insufficient liquidity, and there is little pressure on debt repayment in the short term. The company can use the funds raised from long-term liabilities to increase fixed assets and expand business scale.2. Compared with the owner's equity, the long-term debt is the capital source with fixed repayment period and fixed interest expense, which is less stable than the owner's equity. If the long-term debt ratio is too high, it will inevitably mean that the shareholders' equity ratio is low, and the company's capital structure is risky and unstable, which will bring additional risks to the company during the economic recession.