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What Is The Ability To Repay Debts?

2011/1/29 10:12:00 65

Ability To Repay Debts


The ability to repay debts is the ratio between the main business profits of enterprises and the debts owed by enterprises, that is, assuming that the profits of enterprises are all used to compensate enterprises.

debt

It reflects the shortest period (years) required by an enterprise to repay all debts through operating profits.

Namely:


Ability to repay debt = Current Liabilities + long term Liabilities / main business

profit


The index is different in terms of computation. The portion of the current liabilities can be calculated as the cost of the enterprise, while the operating profit is deducted.

cost

But the comparability is relatively small, only when the enterprise has less liquid assets and more structured assets.

Because in this case, the liabilities of enterprises are mainly repaid by profits.

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