Equity Ratio Calculator (Financial Autonomy)
Calculate the proportion of assets financed by shareholders' equity. Visualize financial solvency with dynamic charts and compare against industry benchmarks.
About
The Equity Ratio measures the degree of leverage used by a company to finance its operations and growth. It specifically isolates the portion of total assets that are owned outright by shareholders rather than creditors. A higher ratio generally indicates a debt-free company with strong financial autonomy while a low ratio suggests heavy reliance on borrowed capital. Investors use this metric to gauge the risk of insolvency during economic downturns. Companies with low equity ratios face higher interest burdens and carry greater risk of bankruptcy if cash flows decline. Conservative industries typically maintain higher equity baselines than capital-intensive sectors like utilities or telecommunications.
Formulas
The calculation requires two key figures from the corporate balance sheet. The ratio is dimensionless but often expressed as a percentage.
Where Total Assets must equal Liabilities + Equity.
Reference Data
| Industry Sector | Conservative Ratio | Average Ratio | Aggressive Ratio | Risk Profile |
|---|---|---|---|---|
| Technology (SaaS) | > 0.70 | 0.60 | < 0.40 | Low hard assets, high equity |
| Manufacturing | > 0.50 | 0.40 | < 0.25 | Moderate leverage standard |
| Banking & Finance | > 0.15 | 0.10 | < 0.05 | High leverage inherent to model |
| Real Estate (REITs) | > 0.45 | 0.35 | < 0.20 | Asset heavy, debt driven |
| Retail | > 0.55 | 0.45 | < 0.30 | Inventory financing impacts |
| Utilities | > 0.40 | 0.30 | < 0.20 | Stable cash flow allows debt |
| Startups (Seed) | > 0.90 | 0.80 | < 0.50 | Usually near 100% equity |
| Distressed Firms | N/A | < 0.00 | Neg | Insolvency risk high |