What Is Debt Capacity?
Liability is the ability of an enterprise to repay its debt. The solvency of an enterprise is restricted by the maturity period of the enterprise's liabilities and the content of the assets required to repay the debt. The assets required to repay different liabilities are different.
Liability
Right!
- Chinese name
- Liability
- Classification
- Current and long-term liabilities
- Asset classification
- Liquid assets and non-current assets
- Solvency
- Short and long
- Liability is the ability of an enterprise to repay its debt. The solvency of an enterprise is restricted by the maturity period of the enterprise's liabilities and the content of the assets required to repay the debt. The assets required to repay different liabilities are different.
- Generally speaking, because liabilities can be divided into current liabilities and long-term liabilities, and assets can be divided into current assets and non-current assets, the solvency can be divided into short-term and long-term solvency. The short-term solvency can be obtained mainly by comparing the current assets and current liabilities of the enterprise, including the current ratio, quick ratio, and cash ratio. Long-term debt serviceability can be obtained mainly by comparing non-current assets and income of enterprises with long-term liabilities, including long-term debt ratio, asset-liability ratio, net asset-liability ratio, debt principal and interest repayment ratio, interest earning multiples, and fixed expense compensation multiples . In addition, the impact of contingent liabilities and off-balance sheet events on the solvency of an enterprise needs to be considered.