Calculate business or home equity percentage from owner’s equity and total assets, or from home value and remaining mortgage balance.
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Equity Percentage Formula
The following formula is used to calculate the equity percentage for a given owner’s equity and total assets.
Variables:
- P is the equity percentage
- E is the owner’s equity
- A is the total assets
To calculate the equity percentage, divide the owner’s equity by the total assets and multiply the result by 100 to convert it to a percentage.
What is Equity Percentage?
Equity percentage is a financial metric that represents the proportion of a company’s total assets that are financed by the owner’s equity. It describes financing structure, but the ratio alone does not establish a business’s financial health or stability. A higher equity percentage means more of the asset value is represented by owner’s equity; a lower percentage generally indicates greater reliance on liabilities. Use amounts from the same balance sheet. In Home Equity mode, the calculator uses home value minus the entered mortgage balance and excludes other liens and selling costs. This metric is commonly used by investors, creditors, and analysts to assess the risk and financial leverage of a business.
How to Calculate Equity Percentage?
The following steps outline how to calculate the Equity Percentage.
- First, determine the owner’s equity (E).
- Next, determine the total assets (A).
- Finally, calculate the equity percentage using the formula P = (E / A) * 100.
- After inserting the values and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
Owner’s Equity (E) = $50,000
Total Assets (A) = $200,000
