Financing risk refers to the risk t

Financing risk refers to the risk that an enterprise loses its solvency due to debt management. It is very important to arrange the debt-capital ratio and equity-capital ratio reasonably in capital structure decision-making. Due to the imperfect characteristics of the dry market, reasonably increasing the debt-capital ratio and reducing the equity-capital ratio in a specific period can reduce the comprehensive capital cost of enterprises, improve the company's value, and obtain financial leverage benefits by using debt financing. However, if enterprises blindly pursue reducing the capital cost, resulting in excessive debt scale, they will inevitably bear too much interest expenses, which will lead to financial crisis. When the enterprise needs funds, it insists on "internal financing first, then external financing;" In theory, the financial risk of a conservative capital structure (that is, the enterprise is completely debt-free) is equal to zero: when the enterprise reaches the optimal debt scale, the financial risk is the smallest' and zero debt also means high risk, and when it continues to expand the debt amount after exceeding the optimal debt scale, the financial risk will also increase.