1. What is the asset-liability ratio?
The asset-liability ratio appears on the balance sheet of financial statements and refers to the ratio of total liabilities to total assets. Debt ratio = total liabilities/total assets. This indicator is one of the static indicators to measure the debt repayment ability of a project (other indicators include debt service coverage ratio and interest coverage ratio).
2. What is the law of the asset-liability ratio throughout the calculation period?
As far as an ordinary wind farm is concerned, the overall asset-liability ratio is generally decreasing.
3. What is the appropriate range for the asset-liability ratio?
We know that the asset-liability ratio exists because only part of the project investment is capital, and most of the investment comes from borrowing. At this time, capital exists as a labor tool, and borrowing tools will inevitably generate rent. The rent of money is commonly known as interest. , Interest is a double-edged sword. It can bring higher returns to the project and at the same time bring double losses to the project, so how to use it is very important, but how to use it in the eyes of different people is different standard.
1 Creditor (Bank)
Borrowing from banks is the most common financing method, and banks are also willing to lend money to capable project developers to achieve the purpose of making money with money. Take a wind farm as an example. For banks, it is not very concerned about this. The power generation of the project can reach 2000 or 3000, because it does not care how much the tool brings to the borrower, but only cares whether the borrower can safely return the tool and pay the full rent in time. In this case, the creditor wants to provide as small a share of the total assets as possible, and the risk is as low as possible. The worst and most extreme situation is that the project is all borrowed and has no capital, commonly known as empty-handed white wolf, Then the risks of the project are all paid for by the creditors, which is definitely the last thing creditors want to see. Therefore, from the perspective of creditors, the lower the asset-liability ratio, the better.
2 Investors (owners)
For the owner, the investment in a project is certain, and the loan amount is certain, so no matter whether there is income, high or low, it does not affect the interest paid by the investor, so the limited investment to obtain unlimited income is the investor. The biggest pursuit is that as long as the profit rate of all capital exceeds the interest rate of borrowed capital, that is, the interest rate of borrowed funds, the project will be profitable. In this case, investors hope that the asset-liability ratio is as high as possible. The most ideal state is Borrow chickens to lay eggs. Of course, if the rate of return on all capital is lower than the interest rate on borrowed capital, it means that the bank’s money is too expensive and cannot be used, so it is natural to borrow less, and the lower the debt ratio, the better. However, in this special case, it is questionable whether the project has development significance, because it is very likely that the income of the funds invested in the project is not as good as the interest obtained by depositing the money in the bank.
Post time: May-27-2022
