What is shareholders' equity ratio? Equity to Asset Ratio

Equity to Asset Ratio in English is an important indicator of a company's financial strength. It measures the proportion of a listed company's assets that come from the sale of shares. It can also be used to measure the solvency of a listed company. It is one of the important indicators for measuring a company's long-term financial stability. In general, the value of the shareholders' equity ratio fluctuates between 0 and 1. The larger the shareholder's equity ratio, the lower the leverage in the company's finances and the stronger its financial strength. A company's total assets (Asset) is equal to the sum of total shareholders' equity (Equity) and total debt (Liability). The shareholders' equity ratio compares total shareholders' equity with total assets to analyze the proportion of assets obtained from the sale of stocks among the company's assets. Inversely, it can also be calculated to calculate the proportion of assets obtained from debt among the company's assets. When the shareholders' equity ratio is high, it means that most of the company's assets come from shareholders' investments rather than external debts. In this way, when the company repays all debts, the higher the returns that all shareholders can receive. On the contrary, when the shareholders' equity ratio is low, it means that most of the company's assets come from external debts. If the company must repay all debts, the income left to shareholders will be very limited. In the extreme case, when the company is forced to liquidate, the assets left to shareholders may be very few. In this case, investors need to be very cautious.