A financial ratio that aims to express a company’s capital structure which relates a company’s ability to cover fixed investments (fixed assets) with its own means or internal sources of financing (equity). This ratio is given by the following formula:
Equity-to-asset ratio = net worth/ total assets
This ratio measures the amount of total assets owned by the company. These assets are financed by its own equity (net worth), rather than from external sources. It is the opposite of the debt-asset ratio.
Equity-to-asset ratio is a measure of a company’s solvency (solvency indicator) that capitalizes on inputs from the balance sheet. The higher this ratio, the more solvent a company is.
This ratio is known for short as EAR.
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