Non-Current Assets to Net Worth Ratio Calculator
Measure the proportion of long-term assets financed by shareholders' equity
| Ratio Range | Interpretation | Your Ratio | Status |
|---|---|---|---|
| Below 0.5 | Conservative capital structure | - | - |
| 0.5 - 1.0 | Moderate capital structure | - | - |
| 1.0 - 1.5 | Aggressive capital structure | - | - |
| Above 1.5 | Highly leveraged position | - | - |
The Non-Current Assets to Net Worth Ratio indicates what proportion of long-term 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 Non-Current Assets to Net Worth Ratio Calculator helps businesses and investors evaluate what portion of a company's net worth is tied up in long-term, illiquid assets. This ratio is crucial for assessing financial stability and capital structure.
How the Calculator Works
Formula
Where:
Non-Current Assets = Property, plant, equipment (PP&E), long-term investments, intangible assets
Net Worth = Total assets - Total liabilities (or Shareholders' Equity)
Example Calculation
| Financial Data | Amount ($) |
|---|---|
| Non-Current Assets | 2,500,000 |
| Total Assets | 4,000,000 |
| Total Liabilities | 1,800,000 |
| Net Worth | 2,200,000 (4,000,000 - 1,800,000) |
| Ratio | 1.14 (2,500,000 ÷ 2,200,000) |
Interpretation:
< 0.5: Conservative (ample equity cushion)
0.5 - 1.0: Balanced
> 1.0: Aggressive (most net worth is illiquid)
Key Inputs Required
Non-Current Assets (from balance sheet):
Property, plant & equipment (PP&E)
Long-term investments
Intangible assets (patents, goodwill)
Deferred tax assets
Net Worth:
Total shareholders' equity
Or: Total assets - Total liabilities
Why This Ratio Matters
✅ Liquidity Risk Assessment - High ratios indicate capital is locked in long-term assets
✅ Debt Capacity Evaluation - Lenders use it to gauge collateral coverage
✅ Industry Benchmarking - Capital-intensive sectors naturally have higher ratios
Industry Benchmarks
| Industry | Typical Ratio | Reasoning |
|---|---|---|
| Manufacturing | 0.8 - 1.2 | Heavy PP&E requirements |
| Technology (SaaS) | 0.2 - 0.5 | Asset-light models |
| Utilities | 1.5 - 2.5 | Infrastructure-intensive |
| Retail | 0.3 - 0.6 | Lease-heavy, low PP&E |
How to Improve the Ratio
✔ Lease Instead of Buy - Keep assets off-balance sheet (IFRS 16 considerations)
✔ Monetize Idle Assets - Sell unused property/equipment
✔ Increase Retained Earnings - Boost net worth through profitability
✔ Debt Restructuring - Convert short-term liabilities to long-term
Limitations
⚠ Industry-Specific - Useless for cross-sector comparisons
⚠ Accounting Variations - Different depreciation methods affect PP&E values
⚠ Ignores Asset Quality - Doesn't account for obsolete equipment
Related Ratios
| Ratio | Formula | Focus |
|---|---|---|
| Fixed Assets to Net Worth | PP&E ÷ Net Worth | Just physical assets |
| Debt to Equity | Total Liabilities ÷ Net Worth | Overall leverage |
| Current Ratio | Current Assets ÷ Current Liabilities | Short-term liquidity |
When to Recalculate
Before applying for business loans
During major asset purchases/disposals
Quarterly for financial health monitoring
Final Thoughts
This ratio helps answer:
"Is the company over-invested in illiquid assets relative to its equity base?"
Need help calculating yours? Share your balance sheet figures below! 🏭📊