Stock Market Glossary
Equity ratio
Share of equity in a company's total assets.
In brief: Share of equity in a company's total assets.
Meaning in practice
A high equity ratio signals financial stability and resilience to crises. For banks it is strictly stipulated by regulations (Basel III), for industrial companies it is an indicator of sound accounting.
Context for investors and traders
The term helps put market information into context. Its relevance depends on the instrument, investment horizon and current market situation, so it should be read with other data and a personal risk framework.
How to use this in practice
Use the term first to describe the situation and add verifiable data: time frame, benchmark, costs and liquidity. Only then does it become an assessment that can be connected to an investment objective and risk budget.
What to keep in mind
Avoid false precision. Many market terms describe probabilities or historical patterns; they neither guarantee a return nor replace the review of a specific security.
