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Definition of Equity Ratio

Definition: What is Equity Ratio?

Equity Ratio is the solvency ratio which is used to measure the number of assets financed by the owners’ investment. It can get by comparing the total equity to total assets in the company.

Definition of Equity Ratio

This ratio highlights the 2 main components of sustainable business. The first component shows, from all the assets of the company how much assets are owned outright by the investors.

The second component shows that the company is how much leverage with debt. Equity ratio measure how much assets of the company financed by the investors, Inverse of this ratio shows the number of assets financed by debt.

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