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stability ratios

5 August, 2015 - 14:41
  • assets = liabilities + equity . Equity / assets = ( assets - liability) / assets = 1 - liability / assets.
  • equity / assets = equity ratio.
  • liability / assets = debt ratio. < 0.6 ok.
  • from above, equity ratio = 1 - liability ratio
  • 1/ equity ratio = assets / equity = capitalisation ratio. < 2.5 ok. ( 1/2.5 = 2/5 = 0.4 = acceptable equity ratio threshold).