What is the term for the ratio obtained by dividing stockholders' equity by total assets?

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The term for the ratio obtained by dividing stockholders' equity by total assets is known as the equity ratio. This ratio is significant as it indicates the proportion of a company's assets that are financed by its shareholders rather than by debt. A higher equity ratio suggests a stronger financial position and a lower risk regarding debt obligations, as it reflects a higher level of assets owned outright by the shareholders.

In this context, the equity ratio provides valuable insight into the capital structure of a company, allowing analysts and investors to assess how much of the company's assets are funded by equity versus liabilities. This can be particularly important for evaluating the sustainability and financial health of a business.

Other options represent different financial metrics. For instance, the return on assets measures a company’s profitability relative to its total assets, while the debt ratio evaluates the proportion of a company's assets that are financed through debt. The liabilities ratio focuses on total liabilities in relation to another measure, which is not the same as the equity ratio. Thus, the equity ratio is the correct and relevant term for this specific calculation.

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