How to Calculate the Asset-to-Equity Ratio
Web Stories

How to Calculate the Asset-to-Equity Ratio

Understand the Formula: The Asset-to-Equity Ratio is calculated by dividing total assets by shareholders’ equity, showing a company's financial leverage
Published on: 
The-Asset-to-Equity-Ratio-is-calculated-by-dividing-total-assets-by-shareholders’-equity,-showing-a-company's-financial-leverage.

Understand the Formula: The Asset-to-Equity Ratio is calculated by dividing total assets by shareholders’ equity, showing a company's financial leverage

Collect-total-assets-and-total-equity-values-from-the-company’s-balance-sheet-for-the-relevant-accounting-period

Gather Financial Data: Collect total assets and total equity values from the company’s balance sheet for the relevant accounting period

Divide-total-assets-by-shareholders’-equity-to-find-the-ratio.-Higher-values-suggest-more-debt-financing-than-equity-funding.

Perform the Calculation: Divide total assets by shareholders’ equity to find the ratio. Higher values suggest more debt financing than equity funding

A-higher-ratio-indicates-higher-financial-risk,-while-a-lower-ratio-shows-stronger-equity-financing-and-lower-dependence-on-deb

Interpret the Ratio: A higher ratio indicates higher financial risk, while a lower ratio shows stronger equity financing and lower dependence on debt

Business-Ideas-That-Can-Be-Done-With-Zero-Capital

Compare Across Industry: Compare the ratio with industry standards to evaluate a company’s financial structure and risk relative to competitors

Read-More-Stories'

Read more stories

Next Story

SFC Today
sfctoday.com