Equity as a percentage of capital employed indicates what portion of the total funds available to a company is provided by its real owners (i.e., ordinary shareholders).

The larger this percentage, the lower the risk of liquidation through failure to pay off creditors.

Frequently Asked Questions

What is the equity ratio?

The equity ratio, also known as capital ratio or "financial leverage" ratio, tells investors how much of the company's assets are funded by owners. Equity includes common shareholder equity and preferred stock, which combined represent ownership in a corporation.

What is the formula for equity?

Equity includes common shareholder equity and preferred stock, which combined represent ownership in a corporation. It is found by using this formula: Equity = Common Shareholder Equity + Preferred Stock

What is the formula for total assets?

Total assets are all assets on a company's balance sheet. They are found by using this formula: Total Assets = Current Assets + Long-term Assets

How do you calculate the equity ratio?

The formula is: Equity Ratio = Equity / Assets

What is the formula for current assets?

Current assets are found by using this formula: Current Assets = Cash and Short-Term Investments + Accounts Receivable + Inventory + Other Current Assets

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