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What is the 'Fixed Assets to Net Worth' Ratio?

The fixed assets to net worth ratio is a calculation intended to measure the solvency of a company. It generally tells the analyst what percentage of a company’s assets are cash vs. fixed assets.

To calculate the ratio, you divide net fixed assets into net worth. A fixed assets to net worth ratio greater than 0.75, generally, means that a company has too much of their net worth tied up in assets like equipment, machinery, land, and so on.

A lower fixed assets to net worth ratio would imply that the company has plenty of cash, which may be desirable but may also mean they are not making enough of an effort to grow.

Keywords: assets, net worth, solvency issues, fixed assets to net worth ratio,