The Equity-to-Capital Ratio measures the proportion of a company’s total capital that comes from shareholders’ equity. It shows how much of the business is financed by equity relative to debt. Equity-to-Capital Ratio = Total Equity / (Total Debt + Total Equity)High E/C → Company is conservatively financed, relying more on equity than debt. This means lower financial risk but typically a higher overall cost of capital (since equity is more expensive). Low E/C → Company relies more heavily on debt, which lowers the cost of capital but increases financial risk.
Learn Equity-to-Capital Ratio with interactive examples and practice exercises in our Performance Metrics module.
This interactive learning module helps you understand Equity-to-Capital Ratio through hands-on practice and real-world examples.