What does the Equity Ratio represent?

The Equity Ratio represents the proportion of total assets provided by equity. It is a financial metric used to assess the degree to which a company is financed by its own capital compared to debt. A higher equity ratio indicates a company is relying more on its shareholders’ equity rather than borrowed funds, which can signify financial stability and lower financial risk. Investors and analysts often look at the equity ratio to gauge the financial health and leverage of the company. It is calculated as total equity divided by total assets, providing insight into the ownership structure of the company’s assets.