Subsection of: Financial Ratios, Calculators and Impressing Investors
Provided by the International Finance Corporation
This ratio measures the extent to which the owners’ equity (including retained earnings) is available to fund the debts of the business. It is usually considered less risky if the majority of business debts are funded by owners’ equity instead of debt. That means a lender or potential investor would want to see this ratio as low as possible. An acceptable level in most industries would be around 0.5:1 or lower.
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