Fixed Assets to Net Worth

Fixed Assets to Net Worth provides an indication of company solvency. It indicates the extent to which the owners' assets are illiquid, such as property, plant, and equipment, and if funds are available for the company's operations

Fixed Assets to Net Worth

Fixed Assets to Net Worth is a ratio that provides an indication of company solvency. The ratio indicates the extent to which the owners' assets are illiquid, such as property, plant, and equipment, and the extent to which funds are available for the company's operations (i.e. for working capital). 

 


Calculation of Fixed Assets to Net Worth

Fixed assets to Net Worth formula: Net fixed assets / Net worth

Interpretation of Fixed Assets to Net Worth

Fixed Assets to Net Worth of 0.75 or higher is not generally desirable, as it indicates that the firm is vulnerable to unexpected events and changes in the business climate.



However, the term "fixed assets" has different interpretations so the ratio is difficult to use and compare. That is why a similar ratio is preferred: "Non-Current Assets to Net Worth", referencing the IFRS term "Non-current assets".


Related Terms