Fixed assets to equity ratio
In one sentenceNet fixed assets divided by equity, showing how much of the owners' money is locked in long-term assets and how much is left to finance day-to-day operations.
Simply put
The prudent rule is to finance fixed assets with long-term money such as equity. If the ratio is below 100%, the owners have financed all the fixed assets and part of their money remains for inventory and customers.
If it exceeds 100%, part of the fixed assets is financed by debt, possibly short-term debt, which is a situation that needs review.
Worked example
A laundry has net fixed assets (equipment and building) of 1,800,000 SAR and equity of 2,400,000 SAR.
Net fixed assets1,800,000 SAR
Equity2,400,000 SAR
Equity left for day-to-day operations2,400,000 − 1,800,000 = 600,000 SAR
Ratio = 1,800,000 ÷ 2,400,00075%
Formula: Net fixed assets ÷ equity × 100
in FullScreen ERP
The asset register in the system: a card for each asset with its category, location, purchase date, and cost, and the periodic depreciation entry posted automatically. Fixed assets