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Equity Ratio - E/R

The equity ratio shows the equity in relation to the total capital invested. The equity ratio as a key performance figure stands for the financial stability and for the dependency on loan capital of one company. A high equity ratio is generally considered as a sign for a high financial stability and as a low dependency on loan capital. Additionally also the credit rating of companies increases with increasing equity ratios. Consequently the possibilities to receive loan capital are increasing as well. Companies with high equity ratios generally do not face problems with increasing interest rates as many companies with low equity ratios do. Equity ratios of more than 30% are considered as good.