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What does Equity Ratio mean?
The Equity Ratio is an investment leverage or solvency ratio that measures the number of assets that are financed by owners’ investments by comparing the total equity in the company to the total assets.
Equity Ratio = Owners Equity / Total Assets
For example, ABC International has total equity of $500,000 and total assets of $750,000. On applying the above formula it results in an equity ratio of 67% and implies that 2/3 of the company's assets were paid for with equity.