What is the asset/equity ratio?

Asset/equity ratio is one of the standard formulas used to identify the company's overall financial stability. The function of asset/equity ratios is essentially determined by the value of the total assets of the company, less of any part of the assets owned by the shareholders of the corporation. The amounts of assets owned by shareholders are often referred to as their own capital of owners or their own capital and are often not considered eligible to ensure when corporations try to secure a business loan.

There are several reasons why understanding the current status of assets of assets for the company is to operate. First, the asset/equity ratio can say a lot about the current activity of the company. A company that has relatively few assets that are completely owned and controlled by society, but has an unpaid debt that equals or exceeds the value of the activation as a good investment. At the same time there may be a society with a strong amount of AKTIV and relatively small debt very good investment. However, it is important to realize that low debt and strong assets can also indicate a company that is very conservative and can be against growth strategies. The investigation begins with the view of asset/equity ratio, but further investigation is always a good idea before investing in any company.

Secondly, the asset/capital ratio can be the starting point to ensure a business loan, either to improve existing operations or the expansion of the company in some way. The high asset/equity ratio suggests that the company may be suitable for extending the loan, in particular the amount of debt transmitted by the company is somewhat low, or if the company has proven repayment payment results in time.

In fact, a non -ideal asset/equity ratio that will provide a complete picture to the company's financial health. StA and assets/equity ratio simply provides some basic information that will serve as an initial point in evaluating the value of business. Obviously, a company with several assets and a large debt is not generally a good risk. However, a lot of assets and low debts may indicate other problems that could cause investments not wise. Using the information obtained from the calculation of the asset/equity ratio, it is possible to evaluate the general status of the company and determine whether the company is a good risk.