I'm having some doubts on how to interpret the following ratio. I tend to think of leverage as a measure of how much debt the firm takes on. By equity=Assets-Liabilities. When Equity is negative, I would say a firm is insolvent or very close to not meet its financial obligations.
What's the rationale for the ratio below? When asset/liability is smaller than one, doesn't it mean that assets < liabilities, and so the firm is insolvent? Do they mean these Chinese industries are insolvent?
Wouldn't it be better to use equity instead of assets for a measure of leverage?