Equity ratio
title: "Equity ratio" type: doc version: 1 created: 2026-02-28 author: "Wikipedia contributors" status: active scope: public tags: ["financial-ratios"] topic_path: "general/financial-ratios" source: "https://en.wikipedia.org/wiki/Equity_ratio" license: "CC BY-SA 4.0" wikipedia_page_id: 0 wikipedia_revision_id: 0
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.
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.
References
References
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