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Metric · Capital Structure

Equity Ratio Explained

Q: What is a good equity ratio?

As a rough guide, above 40% counts as solid and below 20% as low. The industry-typical norm differs substantially between, e.g., banks and industrial companies.

Q: Why do banks structurally have lower equity ratios?

Because a bank's business model is based on lending funded by debt (deposits). Separate, regulatorily mandated capital ratios apply there instead of the general rule of thumb.

The equity ratio shows what share of total assets is financed by equity rather than debt. It's one of the central metrics for assessing a company's financial stability.

Updated 20266 min read

Formula

Equity ratio = Equity ÷ Total assets × 100

> 40%Solid capital structure

20–40%Moderate capital structure

< 20%Low equity ratio

Guideline values, industry-dependent, illustrative

The formula in detail

The components of the formula at a glance.

Numerator

Equity

The company's book equity.

Denominator

Total assets

The company's entire asset base, current plus fixed assets.

Equity ratio calculator

Enter your own figures and see the value instantly.

Equity (€m)

Total assets (€m)

Result equity ratio

Solid capital structure

40.0%

A ratio above 40% is generally considered a solid capital base with a corresponding buffer in downturns.

A ratio below 20% means high reliance on debt financing and greater vulnerability to interest-rate or earnings shocks.

Capital-intensive industries such as banks or utilities structurally tolerate lower ratios than margin-rich industrial or software companies.

Typical industry ranges

Typical value range per sector, for orientation.

Basic Materials

44.1–68.8%

Technology

35.5–66.0%

Healthcare

35.3–65.9%

Real Estate

31.9–55.7%

Consumer Cyclical

26.9–57.6%

Consumer Defensive

27.9–52.5%

Energy

30.5–52.3%

Industrials

29.3–53.2%

Communication Services

25.8–57.5%

Utilities

22.1–34.2%

Financial Services

5.7–22.4%

Aggregated sector values (median band). Data as of Nov 15, 2026

Threshold slider

How many sectors meet a threshold?

Move the threshold and see how many of the sectors shown above sit below or above it with their median.

Bounded preview

Threshold for Equity ratio41.4%

Comparison

6 of 11 sectors meet the thresholdBased on the aggregated sector medians above, not on individual companies.

What the metric looks like at large companies

Data as of Nov 15, 2026

Name	Sector	Value	Sector median
Apple Inc.	Technology	27.7%	52.5%
Alphabet Inc Class A	Communication Services	67.5%	37.4%
Amazon.com Inc	Consumer Cyclical	49.3%	41.5%
Space Exploration Technologies Corp. Class A Common Stock	Industrials	44.9%	39.3%
Saudi Aramco	Energy	59.0%	40.6%
Eli Lilly and Company	Healthcare	27.2%	50.0%

Selection: the company with the highest market cap in each sector. Not a recommendation, only worked examples with real values.

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Used in these strategies

Piotroski F-Score (9-Point Check)Nine hard balance-sheet criteria separate substance from a downward spiral.Altman Z-Score: Stress TestFive balance-sheet ratios are condensed into a single measure of bankruptcy risk.

Frequently asked questions

What is a good equity ratio?

As a rough guide, above 40% counts as solid and below 20% as low. The industry-typical norm differs substantially between, e.g., banks and industrial companies.

Why do banks structurally have lower equity ratios?

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Not investment advice. This explanation is for informational purposes only and does not constitute a recommendation to buy or sell securities.