About the Equity Ratio
Equity Ratio is a free financial statement calculator for solvency analysis. The portion of book assets attributable to owners' equity. A 45% equity ratio means 45 cents equity for each $1 of assets. Enter values from the source reports shown alongside each field and receive a calculated figure with contextual interpretation. The tool operates locally in your browser.
Formula or method
Formula: Total shareholders' equity ÷ Total assets × 100. Find the required amounts on the reporting company’s Balance Sheet, Income Statement, Cash Flow Statement or supporting notes. Beginning and ending balance sheet amounts should cover the same period as the income statement numbers. Total shareholders' equity (Balance Sheet): Owners' residual interest, shown as total equity. Equity can be negative after accumulated losses; some equity-based ratios then become misleading. Total assets (Balance Sheet): Reported current plus non-current assets at the same reporting date, usually the Total assets line.
Worked example
Illustrative example inputs: Total shareholders' equity = 150,000; Total assets = 310,000. Replace these sample figures with values from your financial statements to see the calculation. Use consistent units and period lengths; numbers in thousands and millions cannot be combined without conversion.
How to use the tool
- Locate the named accounts on the financial statements and read the accompanying footnotes.
- Enter each amount using one currency, scale and consistent reporting dates or reporting period.
- Read the value together with its low, high and negative interpretation. Compare with past years and industry peers.
Common uses
Financial statement review, small business monitoring, credit analysis, investor education.
Assumptions and limitations
A negative equity ratio can occur when book equity is negative: liabilities exceed assets and financial distress may be serious. A low figure may reflect heavy liabilities and narrow loss-absorption capacity; consider industry context. Higher figures generally indicate a larger equity cushion but cannot reveal profitability or cash conversion. Never decide whether a business is healthy from a single ratio alone. Sector norms, revenue recognition, reporting periods, one-time items and the cash-flow statement all matter.
Frequently asked questions
What does a equity ratio result mean?
The portion of book assets attributable to owners' equity. A 45% equity ratio means 45 cents equity for each $1 of assets. A low figure may reflect heavy liabilities and narrow loss-absorption capacity; consider industry context. Higher figures generally indicate a larger equity cushion but cannot reveal profitability or cash conversion. If a denominator is zero, or book equity is nonpositive for ratios that depend on it, treat the result as undefined rather than zero.
Where to find the numbers on your financial statements
Use amounts from the same business, in the same currency and reporting period. Balance Sheet figures are amounts at particular dates; Income Statement and Cash Flow Statement figures cover a period.
Total shareholders' equity
Source: Balance Sheet
Owners' residual interest, shown as total equity. Equity can be negative after accumulated losses; some equity-based ratios then become misleading.
Total assets
Source: Balance Sheet
Reported current plus non-current assets at the same reporting date, usually the Total assets line.
What does the ratio tell you?
The portion of book assets attributable to owners' equity. A 45% equity ratio means 45 cents equity for each $1 of assets.
How to read a lower result
A low figure may reflect heavy liabilities and narrow loss-absorption capacity; consider industry context.
How to read a higher result
Higher figures generally indicate a larger equity cushion but cannot reveal profitability or cash conversion.
What if the ratio is negative, zero or undefined?
A negative equity ratio can occur when book equity is negative: liabilities exceed assets and financial distress may be serious. A zero denominator is mathematically undefined. Assess profitability, cash generation and balance-sheet quality together.
Calculate the ratio using the formula
Total shareholders' equity ÷ Total assets × 100
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