A more thorough explanation:

The equity ratio is a financial metric that measures the relationship between a company's shareholder equity and its total equity. It is expressed as a percentage and is used to evaluate a company's financial health and solvency.

A company has $500,000 in shareholder equity and $1,000,000 in total equity. The equity ratio is calculated as follows:

Equity Ratio = Shareholder Equity / Total Equity

Equity Ratio = $500,000 / $1,000,000

Equity Ratio = 0.5 or 50%

This means that 50% of the company's total equity is owned by its shareholders.

A homebuyer wants to purchase a property worth $200,000. They have $40,000 in savings for a down payment. The equity ratio is calculated as follows:

Equity Ratio = Down Payment / Property Value

Equity Ratio = $40,000 / $200,000

Equity Ratio = 0.2 or 20%

This means that the homebuyer's equity in the property is 20% and they will need to finance the remaining 80% through a mortgage.

Overall, the equity ratio is an important financial metric that helps investors and lenders evaluate a company's financial health and solvency. A higher equity ratio indicates that a company has a stronger financial position and is less reliant on debt financing.