Assets to equity ratio

The assets to equity ratio is a financial metric used to evaluate a company's financial leverage and risk. It compares the total assets of a company to its shareholders' equity, providing insight into the proportion of a company's assets financed by equity.

The assets to equity ratio is calculated by dividing total assets by shareholders' equity:

Assets to equity ratio = Total assets / Shareholders' equity

This ratio helps investors assess the financial health and risk profile of a company. A high ratio indicates that a company relies more on debt to finance its assets, which can increase financial risk but also potentially lead to higher returns. On the other hand, a lower ratio suggests a more conservative capital structure with less reliance on debt financing.