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The equity ratio(assets/equity) is a good indicator of the level of leverage used by a company by measuring the proportion of the total assets which are financed by shareholders, as opposed to creditors.
sir I don’t understand this statement which I found in Guidance co. 4)b)i). these assets could have also been funded by debt holders’ money, right? they don’t necessarily indicate that all these assets have been purchased from funds collected from equity holders.
Statement in answer is that ratio is a good measure of leverage – i.e. proportion financed by equity as opposed to debt. I’m not sure I can say any more.