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LEVERAGE RATIO 3.1 Total debt ratio. Total debt ratio is a financial ratio that measures the proportion of a company's total debt to its total assets. It is a measure of a company's leverage or the degree to which the company is financing its operations with borrowed funds. According to analytical data, Hoa Phat's total debt ratio from 2020 to 2021 will decrease from 0.55 to 0.053. And this total debt ratio is less than 1, showing that most of the company's assets are still financed from equity sources but tend to increase gradually. As a result, the company will reduce the risk to a more minimal level. On the other hand, when compared to the debt ratio of Vietnam Steel Corporation in 2021, Hoa Phap has the upper hand when it owns a total debt ratio lower than 0.216%. Thereby, the company's business is more efficient and less risky. 3.2 Debt to equity ratio. The debt-to-equity ratio is the ratio between the capital raised by the business from lending activities and the amount of equity. This is the debt-to-equity ratio, which is used to gauge the majority of a company's finances. It measures the ratio of a company's finances that come from debt to equity. It is a measure of the extent to which a company is financing its operations through debt versus wholly owned funds. More specifically, it reflects equity's ability to cover all outstanding liabilities in the event of a business downturn. Hoa Phat's debt-to-equity ratio in 2021 is 0.056 lower than in 2020 (1.22) and this ratio is less than 1, showing that the enterprise's assets are mainly financed by equity. Especially when comparing with the total debt-to-equity ratio of Vietnam Steel Corporation, we find a more secure for Hoa Phat when its total debt-to-equity ratio is smaller than the ratio. debt-to-equity of Vietnam Steel Corporation in 2021 (0.36) and less than 1 shows that the company's assets are mainly financed by equity. This ratio is small, indicating that liabilities account for a small percentage of the total assets of the business, so the business will have less difficulty with financial problems. 3.3 Equity multiplier. The equity multiplier is a financial ratio that measures the extent to which a company is financing its assets through debt versus equity. It is calculated by dividing the total assets of the company by the shareholders' equity. It shows how much debt the company has used to finance its assets. A higher ratio indicates that the company is financing its assets with more debt and less equity, while a lower equity ratio indicates the opposite. Hoa Phat's equity ratio in 2021 is 1,056 smaller than in 2020 (2.22), showing that if in 2020 the company depends on debt and interest, in 2021 with a capital ratio owners less than 2 shows that the company's assets have changed and the company's main assets at that time were mainly equity instead of and reduced debt and interest. On the other hand, the capital ratio of Vietnam Steel Corporation in 2021 reached 1,368, down from 2020 (2.31). Thus, in general, we can see that Hoa Phat's capital ratio is stable and more popular than Vietnam's Steel Corporation because of less risk and less debt. 3.4 Time interest earned. Time earned interest (TIE) is a financial ratio that measures a company's ability to meet interest payments on outstanding debt. This ratio shows how much profit a business earns before tax and interest from its production and business activities to pay for a dollar of interest expense. Hoa Phat's tim interest earned in 2021 reached 55.01 , 6.87 times higher than in 2020 (8.01) and 15.76 times higher than in 2021 of Vietnam Steel Corporation (3.49). This index is greater than 1 and still very high, showing that the profit before tax and interest of Hoa Phat Company is higher than the interest expense, which means that the company is doing very well and has a good financial position. extremely good maintenance with a high-interest rate, no risk for investors as well as no debt. This index also shows that enterprises have done business and used loans extremely effectively, with well-controlled borrowing costs, so they have brought high-interest rates for production and business activities.
It's Not A Pretty Picture Author(s) : John J. Mearsheimer Source: Foreign Policy, Jan. - Feb., 2005, No. 146 (Jan. - Feb., 2005), P. 50 Published By: Slate Group, LLC
