Ratio

Understanding Liabilities to Equity Ratio in Multifamily Property

5 min read

investment

A key measure of financial performance used by multifamily property investors is the liabilities-to-equity ratio. This ratio identifies the percentage of total assets that are financed by debt and the corresponding percentage of total assets that are financed by owner’s equity. In general, residential multifamily investment properties that have a higher liabilities-to-equity ratio will be leveraged more heavily than those with a lower ratio. For investors, this means that more of the returns generated by the investment are likely to come from loan interest payments rather than from profit resulting from changes in the property’s value. A high liabilities-to-equity ratio also means that investors have more risk of losses due to lack of equity cushion in the event of an economic downturn. It is important for investors to review the liabilities-to-equity ratio when considering multifamily property investments.

Formula

Equity Ratio Formula for Successful Forex Trading

4 min read

The equity ratio formula is an important tool in forex trading because it helps traders calculate how much of their trading capital is available for the risk of trade. This ratio is also known as the “trading margin” and it is calculated by dividing the amount of equity (cash) in the trading account by the amount owed in the position (leverage). By calculating and monitoring the equity ratio of a trading account, traders make sure they’re not taking on too much risk and that they always have a cushion of available funds in case of unexpected losses.