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  Stock Market Basics 67: Equity Ratio Explained — How to Measure a Company’s Financial Strength 3-Line Summary The equity ratio shows how much of a company’s total assets are funded by shareholders’ equity. A higher equity ratio usually means the company relies less on debt and has a stronger financial cushion. However, investors should also check profitability, cash flow, debt structure, and industry characteristics before making any judgment. Recommended Keywords equity ratio, equity ratio explained, equity ratio formula, shareholders’ equity, total assets, debt ratio, financial statement analysis, balance sheet analysis, company financial health, investing basics, stock market for beginners, debt analysis, financial stability Table of Contents What Is the Equity Ratio? Equity Ratio Formula Why the Equity Ratio Matters Equity Ratio and Debt Ratio What a High Equity Ratio Means What a Low Equity Ratio Means What Is a Good Equity Ratio? When a High Equity Ratio Can Be Misleading ...