The equity ratio is a financial ratio indicating the relative proportion of equity used to finance a company's assets. The two components are often taken from the firm's balance sheet or statement of financial position (so-called book value), but the ratio may also be calculated using market values for both, if the company's equities are publicly traded.
The equity ratio is a very common financial ratio, especially in Central Europe and Japan, while in the US the debt to equity ratio is more often used in financial (research) reports.
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Debt to Equity Ratio
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Debt to Equity Ratio
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18. Warren Buffett's 1st Rule - What is the Current Ratio and the Debt to Equity Ratio
Transcription
Interpretation
The equity ratio is a good indicator of the level of leverage used by a company. The equity ratio measures the proportion of the total assets that are financed by stockholders, as opposed to creditors. A low equity ratio will produce good results for stockholders as long as the company earns a rate of return on assets that is greater than the interest rate paid to creditors.[1]
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This page was last edited on 3 October 2023, at 19:12