Equity to Asset Ratio
factor.formula
Equity to Asset Ratio:
The parameters in the formula are defined as follows:
- :
Refers to the equity enjoyed by the owners (i.e. shareholders) of a company in its assets, which is equal to total assets minus total liabilities, reflecting the net worth of the company. It is usually taken from the total shareholders' equity (or equity attributable to the owners of the parent company) in the consolidated balance sheet of the most recent reporting period.
- :
Refers to all economic resources owned by the enterprise, including current assets and non-current assets, reflecting the overall size of the enterprise. Usually taken from the total assets in the consolidated balance sheet of the most recent reporting period.
- :
Total Shareholders' Equity
- :
Total Assets
factor.explanation
The equity asset ratio is a classic indicator for measuring the capital structure of an enterprise. This ratio reflects the ability of an enterprise to operate with its own funds and the level of its financial risk. A moderate equity asset ratio is generally considered to be ideal, as it can not only ensure that the enterprise has a certain risk resistance, but also effectively use financial leverage to increase shareholder returns. An equity asset ratio that is too low may indicate that the enterprise faces a higher debt repayment risk, and may also indicate a higher operating risk; while an equity asset ratio that is too high, although financially sound, may mean that the enterprise has failed to give full play to the financial leverage effect, resulting in a low return on capital. In practical applications, the reasonable range of this indicator needs to be comprehensively considered based on factors such as industry characteristics and the stage of enterprise development, and analyzed in combination with other financial indicators.