Equity Ratio Calculator: What Share Do Owners Hold?

What does a ratio of 60.00% mean?

On the defaults — $600,000 of total equity and $1,000,000 of total assets — the equity ratio is 60.00% (ratio decimal 0.6000), which means 60 cents of every asset dollar is funded by the owners. The implied debt is $1,000,000.00 − $600,000.00 = $400,000.00, and the ratio is $600,000.00 ÷ $1,000,000.00 = 60.00%. A ratio of 60.00% means the business is funded 60% by its owners and 40% by borrowing — for every $100 of assets, $60 belongs to the owners and $40 is owed to lenders. Whether that is strong or thin depends on the industry and on how steady the earnings are — a 60.00% ratio against steady cash flow is comfortable, and the same 60.00% against shaky earnings still leaves the owners exposed if earnings slip.

Three things about the model are worth stating plainly.

First, the division is $600,000.00 ÷ $1,000,000.00 = 60.00%, and the ratio decimal is 0.6000 — the percent and the decimal are two outputs, never the same number. Second, the meaning is 60 cents of every asset dollar is funded by the owners — the owners’ share of everything the business owns, not a multiple of equity and not a measure of profitability. And third, the ratio is displayed as a percent to two decimals, half-up, and a ratio that displays as 60.00% can sit a hair below or above the displayed figure: $599,999.50 of equity and $1,000,000 of assets gives 59.999950%, which displays as 60.00%, and $123,456.78 of equity and $876,543.21 of assets gives 14.084506%, which displays as 14.08% — all listed in Accuracy & limitations.

The worked example, line by line

Setup: total equity $600,000, total assets $1,000,000.

Line 1 — the implied debt. $1,000,000.00 − $600,000.00 = $400,000.00.

Line 2 — the ratio. $600,000.00 ÷ $1,000,000.00 = 60.00% (unrounded 60.000000%; ratio decimal 0.6000).

Line 3 — the check. At $750,000 of total equity the ratio is 75.00%; and at $749,999 it is 74.999900% — below 75.00%.

Every branch, checked

Equity $500,000: total equity $500,000.00; total assets $1,000,000.00; implied debt $500,000.00; equity ratio 50.00% (ratio decimal 0.5000) — With $500,000 of total equity the ratio falls to 50.00%.

Equity $300,000: total equity $300,000.00; total assets $1,000,000.00; implied debt $700,000.00; equity ratio 30.00% (ratio decimal 0.3000) — With $300,000 of total equity the ratio falls to 30.00%.

Assets $800,000: total equity $600,000.00; total assets $800,000.00; implied debt $200,000.00; equity ratio 75.00% (ratio decimal 0.7500) — With $800,000 of total assets the ratio rises to 75.00%.

Assets $1,200,000: total equity $600,000.00; total assets $1,200,000.00; implied debt $600,000.00; equity ratio 50.00% (ratio decimal 0.5000) — With $1,200,000 of total assets the ratio falls to 50.00%.

Equity $750,000: total equity $750,000.00; total assets $1,000,000.00; implied debt $250,000.00; equity ratio 75.00% (ratio decimal 0.7500) — With $750,000 of total equity the ratio rises to 75.00%.

Assets $2,000,000: total equity $600,000.00; total assets $2,000,000.00; implied debt $1,400,000.00; equity ratio 30.00% (ratio decimal 0.3000) — With $2,000,000 of total assets the ratio falls to 30.00%.

Equity $400,000: total equity $400,000.00; total assets $1,000,000.00; implied debt $600,000.00; equity ratio 40.00% (ratio decimal 0.4000) — With $400,000 of total equity the ratio falls to 40.00%.

Assets $1,500,000: total equity $600,000.00; total assets $1,500,000.00; implied debt $900,000.00; equity ratio 40.00% (ratio decimal 0.4000) — With $1,500,000 of total assets the ratio falls to 40.00%.

The reverses, worked backwards

Smallest total equity for the ratio to REACH 50%: At the displayed $500,000 the figures are total equity $500,000.00; total assets $1,000,000.00; implied debt $500,000.00; equity ratio 50.00% (unrounded 50.000000%) (ratio decimal 0.5000). At $499,999 the ratio is 49.999900% unrounded — below the target, though it displays as 50.00% — so $500,000 is the smallest total equity for the ratio to REACH 50%.

Largest total assets for the ratio to STAY at or above 45%: At the displayed $1,333,333 the figures are total equity $600,000.00; total assets $1,333,333.00; implied debt $733,333.00; equity ratio 45.00% (unrounded 45.000011%) (ratio decimal 0.4500). At $1,333,334 the ratio is 44.999978% unrounded — below the target — and at $1,333,332 the ratio is 45.000045% unrounded — above the target — so $1,333,333 is the largest total assets for the ratio to STAY at or above 45%.

Smallest total equity for the ratio to REACH 75%: At the displayed $750,000 the figures are total equity $750,000.00; total assets $1,000,000.00; implied debt $250,000.00; equity ratio 75.00% (unrounded 75.000000%) (ratio decimal 0.7500). At $749,999 the ratio is 74.999900% unrounded — below the target, though it displays as 75.00% — so $750,000 is the smallest total equity for the ratio to REACH 75%.

Largest total equity for the ratio to STAY at or below 35%: At the displayed $350,000 the figures are total equity $350,000.00; total assets $1,000,000.00; implied debt $650,000.00; equity ratio 35.00% (unrounded 35.000000%) (ratio decimal 0.3500). At $350,001 the ratio is 35.000100% unrounded — above the target, though it displays as 35.00% — so $350,000 is the largest total equity for the ratio to STAY at or below 35%.

Smallest total assets for the ratio to STAY at or below 40%: At the displayed $1,500,000 the figures are total equity $600,000.00; total assets $1,500,000.00; implied debt $900,000.00; equity ratio 40.00% (unrounded 40.000000%) (ratio decimal 0.4000). At $1,499,999 the ratio is 40.000027% unrounded — above the target, though it displays as 40.00% — so $1,500,000 is the smallest total assets for the ratio to STAY at or below 40%.

Largest total assets for the ratio to STAY at or above 30%: At the displayed $2,000,000 the figures are total equity $600,000.00; total assets $2,000,000.00; implied debt $1,400,000.00; equity ratio 30.00% (unrounded 30.000000%) (ratio decimal 0.3000). At $2,000,001 the ratio is 29.999985% unrounded — below the target, though it displays as 30.00% — so $2,000,000 is the largest total assets for the ratio to STAY at or above 30%.

A warning about the neighbours: every neighbour above sits one dollar from the star, and every neighbour ratio is a hair below or above the target even though it displays as the target — a one-dollar move in equity or assets moves the percent by about 0.00004 points, so the displayed two-decimal figure cannot tell the star from its neighbour. The page prints the unrounded six-decimal percent in full so the rounding does not mislead you: 50.000000, 49.999900, 45.000011, 44.999978, 45.000045, 75.000000, 74.999900, 35.000000, 35.000100, 40.000000, 40.000027, 30.000000, 29.999985.

What the defaults assume

The defaults are $600,000 of total equity and $1,000,000 of total assets — total equity $600,000.00; total assets $1,000,000.00; implied debt $400,000.00; equity ratio 60.00% (ratio decimal 0.6000). With Equity $500,000, total equity $500,000.00; total assets $1,000,000.00; implied debt $500,000.00; equity ratio 50.00% (ratio decimal 0.5000). With Equity $300,000, total equity $300,000.00; total assets $1,000,000.00; implied debt $700,000.00; equity ratio 30.00% (ratio decimal 0.3000). With Assets $800,000, total equity $600,000.00; total assets $800,000.00; implied debt $200,000.00; equity ratio 75.00% (ratio decimal 0.7500). With Assets $1,200,000, total equity $600,000.00; total assets $1,200,000.00; implied debt $600,000.00; equity ratio 50.00% (ratio decimal 0.5000). With Equity $750,000, total equity $750,000.00; total assets $1,000,000.00; implied debt $250,000.00; equity ratio 75.00% (ratio decimal 0.7500). With Assets $2,000,000, total equity $600,000.00; total assets $2,000,000.00; implied debt $1,400,000.00; equity ratio 30.00% (ratio decimal 0.3000). With Equity $400,000, total equity $400,000.00; total assets $1,000,000.00; implied debt $600,000.00; equity ratio 40.00% (ratio decimal 0.4000). With Assets $1,500,000, total equity $600,000.00; total assets $1,500,000.00; implied debt $900,000.00; equity ratio 40.00% (ratio decimal 0.4000). With All zero, total equity $0.00; total assets $0.00; equity ratio undefined — no equity, no assets, and the ratio is undefined. With Equity $800,000, assets $1,000,000, total equity $800,000.00; total assets $1,000,000.00; implied debt $200,000.00; equity ratio 80.00% (ratio decimal 0.8000) — four-fifths of the assets are funded by the owners. With Fractional inputs (ratio unrounded 59.999950%), total equity $599,999.50; total assets $1,000,000.00; implied debt $400,000.50; equity ratio 60.00% (unrounded 59.999950%) (ratio decimal 0.6000) — the ratio displays as 60.00%. With Equity $6,000,000, assets $10,000,000, total equity $6,000,000.00; total assets $10,000,000.00; implied debt $4,000,000.00; equity ratio 60.00% (ratio decimal 0.6000) — the same ratio at ten times the size. With Equity $0, total equity $0.00; total assets $1,000,000.00; implied debt $1,000,000.00; equity ratio 0.00% (ratio decimal 0.0000) — no equity at all, a real figure, not undefined. With Assets $0, total equity $600,000.00; total assets $0.00; equity ratio undefined — no assets to divide by. With Negative equity, total equity −$100,000.00; total assets $1,000,000.00; implied debt $1,100,000.00; equity ratio −10.00% (ratio decimal −0.1000) — the ratio is negative, a real figure. With Small numbers, total equity $50,000.00; total assets $200,000.00; implied debt $150,000.00; equity ratio 25.00% (ratio decimal 0.2500) — a quarter of the assets are funded by the owners. With Fractional inputs (ratio unrounded 14.084506%), total equity $123,456.78; total assets $876,543.21; implied debt $753,086.43; equity ratio 14.08% (unrounded 14.084506%) (ratio decimal 0.1408) — the ratio displays as 14.08%. With High ratio, total equity $900,000.00; total assets $1,000,000.00; implied debt $100,000.00; equity ratio 90.00% (ratio decimal 0.9000) — nine-tenths of the assets are funded by the owners. With Equity $145,000, assets $580,000, total equity $145,000.00; total assets $580,000.00; implied debt $435,000.00; equity ratio 25.00% (ratio decimal 0.2500) — a quarter of the assets are funded by the owners.

A note on the rounding: the ratio is displayed as a percent to two decimals, half-up. With the fractional inputs the unrounded ratio is 59.999950% — it displays as 60.00% — and with the other fractional inputs it is 14.084506% — it displays as 14.08%. The page prints the unrounded value so the rounding does not mislead you.

Output · formula · meaning

Who uses this

• The founder checking the balance sheet: they learn $600,000 of total equity against $1,000,000 of total assets is a ratio of 60.00% — and they check the $500,000 reverse to see the equity that drops the ratio to 50.00%.
• The lender sizing a loan: they learn a ratio of 60.00% means 60 cents of every asset dollar is funded by the owners — and they check the $1,333,333 reverse to see how many assets keep the ratio at or above 45.00%.
• The investor comparing two companies: they learn the ratio rises when the equity rises or the assets fall — and they check the $750,000 reverse to see the equity that pushes the ratio to 75.00%.
• The student learning leverage ratios: they learn the ratio is the total equity divided by the total assets — and they check the $350,000 reverse to see how much equity keeps the ratio at or below 35.00%.

Accuracy & limitations

The math is first-principles: the equity ratio is the total equity divided by the total assets — all in dollars, the ratio displayed as a percent to two decimals half-up, and as a ratio decimal to four decimals. There IS division in this calculator — at $0 of total equity and $0 of total assets the ratio is UNDEFINED, division by zero, no assets to divide by — the calculator shows “ratio undefined” with a note, never hides it. The ratio is also undefined when total assets is $0 for any other reason, for example $600,000 of equity against $0 of assets. At $0 of total equity the ratio is 0.00% — a real figure, not undefined — and at negative total equity the ratio is negative: −$100,000 of equity against $1,000,000 of assets gives −10.00% (unrounded −10.000000%) — a real figure, shown with the U+2212 minus sign. Negative total assets is NOT meaningful — assets are things owned, never negative — say so plainly and do not treat a negative assets figure as a real case. With the fractional inputs the unrounded ratio is 59.999950% — it displays as 60.00% — and with the other fractional inputs it is 14.084506% — it displays as 14.08%. What the model cannot do is say whether 60.00% is a good ratio: the ratio says nothing about what the debt costs — a 60.00% ratio at cheap rates is comfortable and the same 60.00% at punishing rates still leaves the owners exposed if earnings slip. It also says nothing about when the debt falls due — the ratio lumps short-term and long-term borrowing into one implied-debt number. Use it to see what share of the assets the owners fund — then check the debt-to-capital ratio, the equity multiplier and the return on assets before you decide the funding mix pays.

Frequently asked questions