The indicator of overcapitalization / undercapitalization is one of the indicators of indebtedness and financial structure and possibly also liquidity.
The ratio indicates the proportion in which are fixed assets financed by long-term funds. The analysis provides similar result as the analysis of working capital.
→ lower risk (serves as a buffer, because it is possible to use the money raised from the potential sale of current assets financed by long-term sources for something else without compromising the stability of the entity)
→ lower efficiency, because long-term funds tend to be more expensive than short-term funds
→ risk that the entity will be forced to sell this part of fixed assets to be able to pay its short-term liabilities
The indicator should surely be greater than 1. However, there is no generally recommended value; it depends on specific conditions.