Fixed Assets to Net Worth Ratio Calculator
Measure the proportion of fixed assets financed by shareholders' equity
| Ratio Range | Interpretation | Your Ratio | Status |
|---|---|---|---|
| Below 0.5 | Conservative capital structure | - | - |
| 0.5 - 0.8 | Moderate capital structure | - | - |
| 0.8 - 1.2 | Aggressive capital structure | - | - |
| Above 1.2 | Highly leveraged position | - | - |
The Fixed Assets to Net Worth Ratio indicates what proportion of fixed assets are financed by shareholders' equity rather than debt. It helps assess financial stability and capital structure.
• Increase retained earnings
• Issue additional equity
• Sell non-productive assets
• Reduce long-term debt
• Ratio increasing over time
• Declining net worth
• High proportion of intangible assets
• Ratio significantly above industry norms
A Fixed Assets to Net Worth Ratio Calculator helps business owners, investors, and creditors evaluate what portion of a company's equity is invested in fixed assets (property, plant, and equipment). This ratio reveals how "asset-heavy" a business is and assesses financial stability.
How the Calculator Works
Formula
Where:
Fixed Assets (Net) = Property, Plant & Equipment (PP&E) - Accumulated Depreciation
Net Worth = Total Assets - Total Liabilities (or Shareholders' Equity)
Example Calculation
| Financial Data | Amount ($M) |
|---|---|
| Property, Plant & Equipment | 80 |
| Accumulated Depreciation | (20) |
| Net Fixed Assets | 60 |
| Total Assets | 150 |
| Total Liabilities | 90 |
| Net Worth | 60 (150 - 90) |
| Ratio | 100% (60 ÷ 60 × 100) |
Interpretation:
< 75%: Conservative (ample equity cushion)
75-100%: Balanced
> 100%: Aggressive (net worth fully tied in fixed assets)
> 150%: Warning sign (possible over-investment)
Key Inputs Required
Net Fixed Assets (from balance sheet):
Land
Buildings
Machinery
Vehicles
Less: Accumulated Depreciation
Net Worth:
Total Shareholders' Equity
Or: Total Assets - Total Liabilities
Why This Ratio Matters
✅ Financial Stability Check - High ratios indicate illiquid capital structure
✅ Loan Approval Insight - Banks set maximum thresholds (often 80-90%)
✅ Investment Analysis - Helps compare capital intensity across firms
✅ Operational Flexibility - Low-ratio companies adapt faster to changes
Industry Benchmarks
| Industry | Typical Ratio | Reasoning |
|---|---|---|
| Manufacturing | 90-120% | Heavy machinery needs |
| Software | 20-40% | Asset-light business |
| Retail Stores | 60-90% | Moderate store investments |
| Airlines | 150-200% | Aircraft dominate balance sheets |
How to Improve the Ratio
✔ Lease Instead of Buy - Keep assets off balance sheet (IFRS 16 considerations)
✔ Increase Retained Earnings - Grow net worth through profitability
✔ Sell Idle Assets - Convert unused equipment to cash
✔ Debt Restructuring - Convert short-term loans to long-term
Limitations
⚠ Depreciation Methods Affect Results - Accelerated vs straight-line impacts net fixed assets
⚠ Industry-Specific - Useless for cross-sector comparisons
⚠ Ignores Asset Productivity - Doesn't measure ROA or utilization
Related Ratios
| Ratio | Formula | Focus |
|---|---|---|
| Fixed Asset Turnover | Sales ÷ Net Fixed Assets | Asset efficiency |
| Debt-to-Equity | Total Liabilities ÷ Net Worth | Overall leverage |
| Current Ratio | Current Assets ÷ Current Liabilities | Short-term liquidity |
When to Recalculate
Before major capital expenditures
When applying for equipment financing
During business valuation processes
Annually for strategic planning
Real-World Example: Walmart vs. Amazon (2023)
Walmart: 85% ($110B net PP&E ÷ $130B equity)
Amazon: 45% ($120B net PP&E ÷ $270B equity)
Analysis: Walmart's higher ratio reflects its massive store footprint
Final Thoughts
This ratio answers:
"What percentage of owner's equity is locked in long-term physical assets?"
Need help calculating yours? Share your fixed assets and net worth below! 🏭📊