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Equity ratio

Equity ratio

Description

Equity ratio indicates which part of the company’s assets was owned from shareholders’ funds. This ratio is very similar to equity multiplier. The only difference is that in one way denominator is equity (equity multiplier), and in another – assets (equity ratio). Data to calculate this ratio is collected from balance sheet.

Norms and limitations

There are no general norms for this ratio.

A higher value of equity ratio indicates a lower financial leverage. It means that company’s activity might be considered as safe.

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