Enter the shareholders’ equity and total assets into the calculator to determine the proprietary ratio, or enter the proprietary ratio and one of the other variables to determine the missing value.
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Proprietary Ratio Formula
The following formula is used to calculate the proprietary ratio for a given set of financial data.
PR = SE / TA
Variables:
- PR is the proprietary ratio
- SE is the shareholders’ equity
- TA is the total assets
To calculate the proprietary ratio, divide the shareholders’ equity by the total assets. This ratio indicates the proportion of total assets that are financed by shareholders’ equity.
What is a Proprietary Ratio?
The proprietary ratio is a financial metric that indicates the proportion of a company’s total assets that are financed by shareholders’ equity. It is a measure of the financial stability and solvency of a company. A higher proprietary ratio suggests that a larger portion of the company’s assets are funded by equity, which is generally considered a positive indicator of financial health. Conversely, a lower proprietary ratio may indicate higher reliance on debt financing, which could be a sign of financial risk.
How to Calculate Proprietary Ratio?
The following steps outline how to calculate the Proprietary Ratio.
- First, determine the shareholders’ equity (SE).
- Next, determine the total assets (TA).
- Finally, calculate the proprietary ratio using the formula PR = SE / TA.
- 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.
Shareholders’ Equity (SE) = 500,000
Total Assets (TA) = 1,000,000