Enter the equity value in currency.
Enter the fixed assets value in currency.
History:

Explanation

What is the Equity to Fixed Assets Ratio?

The Equity to Fixed Assets Ratio is a financial metric that measures the relationship between a company’s equity and its fixed assets. It provides insight into how much of the company’s fixed assets are financed by equity rather than debt. A higher ratio indicates a stronger financial position, as it suggests that the company relies less on borrowed funds to finance its assets.

Formula:

The Equity to Fixed Assets Ratio can be calculated using the following formula:

Equity to Fixed Assets Ratio (R):

§§ R = \frac{E}{FA} §§

where:

  • § R § — Equity to Fixed Assets Ratio
  • § E § — Total Equity
  • § FA § — Total Fixed Assets

How to use the Equity to Fixed Assets Ratio Calculator?

  1. Input Equity Value: Enter the total equity of the company in the designated field. This value represents the ownership interest in the company after all liabilities have been deducted.

  2. Input Fixed Assets Value: Enter the total value of fixed assets. Fixed assets include long-term tangible assets such as property, plant, and equipment that are used in the operations of the business.

  3. Calculate the Ratio: Click the “Calculate” button to compute the Equity to Fixed Assets Ratio. The result will indicate how much equity is available for every dollar of fixed assets.

  4. Clear Fields: If you want to start over, use the “Clear All Fields” button to reset the inputs.

Example Calculation

Example 1:

  • Total Equity (E): $100,000
  • Total Fixed Assets (FA): $250,000

Calculation:

§§ R = \frac{100,000}{250,000} = 0.4 §§

This means that for every dollar of fixed assets, there is $0.40 of equity.

Example 2:

  • Total Equity (E): $150,000
  • Total Fixed Assets (FA): $300,000

Calculation:

§§ R = \frac{150,000}{300,000} = 0.5 §§

This indicates that for every dollar of fixed assets, there is $0.50 of equity.

When to use the Equity to Fixed Assets Ratio Calculator?

  1. Financial Analysis: Assess the financial health of a company by understanding its reliance on equity versus debt for financing fixed assets.

  2. Investment Decisions: Investors can use this ratio to evaluate the risk associated with a company’s capital structure before making investment decisions.

  3. Comparative Analysis: Compare the ratio across different companies in the same industry to gauge relative financial stability.

  4. Credit Assessment: Lenders may use this ratio to determine the creditworthiness of a business when considering loan applications.

  5. Strategic Planning: Companies can use this ratio to inform their financial strategies and capital allocation decisions.

Key Terms

  • Equity (E): The value of the owners’ interest in the company, calculated as total assets minus total liabilities.
  • Fixed Assets (FA): Long-term tangible assets that are not expected to be converted into cash within a year, such as buildings, machinery, and equipment.

Use the calculator above to input different values and see the Equity to Fixed Assets Ratio change dynamically. The results will help you make informed financial decisions based on the data you have.