abhishreshthaa
Abhijeet S
EQUITY RATIO
This equity ratio is also known as ‘proprietary ratio’ or ‘net worth ratio’. This ratio expresses the relationship between shareholders fund and total assets.
Formula:-
Equity Ratio = Shareholder’s Fund
Total Assets
Uses of Equity Ratio
The equity ratio serves 3 purposes. They are :-
i. The equity ratio is an index of the amount of proprietor’s funds invested on the total assets of a concern.
ii. It also indicates the proportion between owned capital and loaned capital.
iii. Again, it indicates the relative risks of the owners and the creditors of an enterprise.
Significance:-
The standard ratio for equity ratio is 5:1. One can say that higher the equity ratio stronger is the financial position of the concern.
On the other hand, lower the equity ratio weaker is the financial position of the concern.
This equity ratio is also known as ‘proprietary ratio’ or ‘net worth ratio’. This ratio expresses the relationship between shareholders fund and total assets.
Formula:-
Equity Ratio = Shareholder’s Fund
Total Assets
Uses of Equity Ratio
The equity ratio serves 3 purposes. They are :-
i. The equity ratio is an index of the amount of proprietor’s funds invested on the total assets of a concern.
ii. It also indicates the proportion between owned capital and loaned capital.
iii. Again, it indicates the relative risks of the owners and the creditors of an enterprise.
Significance:-
The standard ratio for equity ratio is 5:1. One can say that higher the equity ratio stronger is the financial position of the concern.
On the other hand, lower the equity ratio weaker is the financial position of the concern.