In-depth Analysis of Distortion in Corporate High Debt Ratio Indicators

The traditional asset-liability ratio indicator has significant limitations in evaluating corporate financial risks. Asset-liability ratio = total liabilities / total assets ×100%, which reflects the proportion of funds provided by creditors in the enterprise’s total assets [1]. However, this indicator treats all liabilities equally, ignoring the essential differences in debt structure. The high debt ratio of some enterprises may come from interest-free liabilities that occupy funds from upstream and downstream partners, such as accounts payable, advance receipts, and other operating liabilities [2]. Although such liabilities are included in total liabilities, they usually do not generate interest expenses and are often accompanied by strong operating cash flow [4].

Interest-free liabilities mainly include accounts payable, advance receipts, contract liabilities, and other liabilities that occupy funds from upstream and downstream partners [3]. From a financial analysis perspective, such liabilities often reflect the enterprise’s strong position and bargaining power in the industrial chain. For example, SF Holding’s asset-liability ratio in the first half of 2025 was 51.35%, but its operating cash flow was abundant, with free cash inflow reaching 8.74 billion yuan [5]. In this case, a high debt ratio may instead be a reflection of competitive advantage rather than a signal of financial risk.

Net cash refers to the net amount of an enterprise’s cash and cash equivalents minus interest-bearing liabilities, reflecting the true liquidity status [5]. Some enterprises have a high asset-liability ratio but abundant net cash, with a high liquidity safety margin [6]. Net cash analysis can penetrate the surface of traditional debt ratio indicators and reveal the enterprise’s true financial health. Goodix Technology’s asset-liability ratio at the end of June 2025 was only 13.8% and continued to decrease, with extremely high financial security [6], which embodies the importance of net cash analysis.

Rapid liquidation ability refers to an enterprise’s ability to quickly realize assets to repay debts in extreme situations, requiring the establishment of a comprehensive evaluation system [3]. According to financial analysis practices, the evaluation of rapid liquidation ability should include:

• Cash ratio = (monetary funds + trading financial assets) / current liabilities
• Quick ratio = (current assets - inventory) / current liabilities
• Net cash / interest-bearing liabilities ratio [4]

These indicators can more accurately reflect the enterprise’s actual debt-servicing ability in emergency situations.

Not all assets have the same realization ability. High-quality assets should have characteristics such as fast realization speed, small realization loss, and good market liquidity [3]. The quality of asset realization varies significantly across industries: inventory realization in manufacturing may face price fluctuations and unsold risks, while the quality of accounts receivable in the service industry depends on customer credit status [4]. Therefore, asset realization quality analysis must be evaluated differently in combination with industry characteristics.

Modern financial analysis has developed from a single indicator to a comprehensive evaluation system, emphasizing penetrating financial statements to see the essence [1]. International rating agencies have generally adopted debt structure analysis instead of simple debt ratio comparison in credit evaluation [2]. With the popularization of supply chain finance, the phenomenon of enterprises occupying upstream and downstream funds has become more common [4], and the limitations of traditional simplified indicators have become increasingly prominent.

Traditional risk screening relying on asset-liability ratio may miss high-quality investment targets. Some enterprises with strong industrial chain positions have high debt ratios but healthy financial essences [5]. Investors need to establish a more refined valuation system, incorporating debt structure analysis, net cash status, rapid liquidation ability, etc., to avoid the “one-size-fits-all” application of financial indicators [2].

When conducting credit approval, banks should pay more attention to the enterprise’s actual debt-servicing ability rather than the surface debt ratio level. For enterprises with a high proportion of interest-free liabilities, the debt ratio requirement can be appropriately relaxed [3]. Risk pricing based on true debt-servicing risk can avoid missing high-quality customers or bearing excessive risks due to misjudgment of traditional indicators [4].

Regulatory authorities have continuously increased disclosure requirements for key information such as debt structure and cash flow [5], encouraging investors to conduct in-depth financial analysis to avoid being misled by surface data [6]. This provides information advantages for professional investors while putting forward higher requirements for financial analysis capabilities.

This analysis reveals the limitations of traditional financial analysis indicators and emphasizes the importance of penetrating analysis. A high corporate debt ratio does not necessarily mean high risk; the key lies in the quality of the debt structure and the net cash status. Investment analysis needs to comprehensively evaluate net cash, debt structure, rapid liquidation ability, and asset realization quality to form a comprehensive understanding of the enterprise.

With the digital development of financial analysis tools [1], in-depth analysis has become possible. Investors should go beyond traditional financial ratios and establish a more three-dimensional and dynamic financial evaluation system. This methodological upgrade not only helps identify high-quality targets misjudged by the market but also effectively avoids real financial risks.