Assets to Equity Ratio

What is the definition of Assets / Equity?

The asset/equity ratio shows the relationship of the total assets of the firm to the portion owned by shareholders. This ratio is an indicator of the company’s leverage (debt) used to finance the firm.


Stockopedia explains Assets / Equity...

There is no ideal asset/equity ratio value but it is valuable in comparing to similar businesses. A relatively high ratio (indicating lots of assets and very little equity) may indicate the company has taken on substantial debt merely to remain its business but a high asset/equity ratio can also mean the return on borrowed capital exceeds the cost of that capital. At some higher levels, however, the ratio can reach unsustainable levels, as the additional debt ratchets up interest costs and the deteriorating financial position puts the firm in jeopardy.

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