What does an asset to equity ratio of 1.83 mean?

Expert Solution

Asset to equity ratio reveals the proportion of an company's assets funded by shareholders. Here assets to equity ratio is 1.83. It shows that if company has assets of $183,000 then equity shareholders has funded $100,000 of assets and rest $83,000 of assets are funded by debt or borrowings. For Example

Total Assets = $183,000

Equity = $100,000

Assets to equity ratio = $183,000 / $100,000 = 1.83

The higher the ratio is, the greater the company's debt. It totally depends upon company that how much of debt portion they prefer to finance their assets which has direct relation with their business risk as well as their cash flow position.

ekkarill92 answered 2 years ago

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