Total Farm Equity divided by total farm assets is known as which ratio?

Total Farm Equity divided by total farm assets is known as which ratio?

• A. Equity to Asset Ratio
• B. Debt to Asset Ratio
• C. Current Ratio
• D. Net Worth Ratio

Answer: (A)

This ratio shows how much of the farm’s assets are funded by the owner’s equity rather than borrowed funds, reflecting solvency and financial structure. It is calculated by dividing total farm equity by total farm assets, so the term that matches this description is the equity to asset ratio. A higher value indicates a stronger equity position and less reliance on debt. The other options don’t fit because they use liabilities (debt to asset), current assets and liabilities (current ratio), or are less precise descriptors of this same funding share.

This ratio shows how much of the farm’s assets are funded by the owner’s equity rather than borrowed funds, reflecting solvency and financial structure. It is calculated by dividing total farm equity by total farm assets, so the term that matches this description is the equity to asset ratio. A higher value indicates a stronger equity position and less reliance on debt. The other options don’t fit because they use liabilities (debt to asset), current assets and liabilities (current ratio), or are less precise descriptors of this same funding share.