Equity %
Net Worth ÷ Total Liabilities (x100)
Benchmark: 35%
Description:In simplistic terms this KPI tells you how much Equity you have in the business, or in other words, how much of the company belongs to the owners. This statistic is used to measure the financial stability of a company and is sometimes used as a measure of the business's ability to borrow money.
Example:A) Net Worth = R1,869,932 B) Total Liabilities = R5,342,663 C) Equity % = 35% (A ÷ B X 100)
Discussion:If you own your home you will no doubt have heard the term Equity. Let's say that your house is worth R100,000 and you have a mortgage of R75,000. The remaining R25,000 represents the money that you put in to buy your house. This is the part of your house that belongs to you, or in other words this is your Equity. To calculate your Equity % you simply divide your share (R25,000) by the total value of the house (R100,000) and express this as a percentage (x 100). In this example the Equity that you have in your house would be 25%. The meaning of Equity in your business is exactly the same and you can find the components for the calculation on your Balance Sheet.
Related Terminology: |