If: O.E + liabilities = F.A + C.A 1) what risks a company may face : A) if total fixed assets is greater than the owner equity fund, and why?

dear Nemani

the question about the risk the company may face. you explain the ratios but you didn't say something about the risks.

Fixed assets to equity ratio measures the contribution of stockholders and the contribution of debt sources in the fixed assets of the company. It is computed by dividing the fixed assets by the stockholders’ equity.

If fixed assets to stockholders’ equity ratio is more than1, it means that stockholders’ equity is less than the fixed assets and the company is using debts to finance a portion of fixed assets. If the ratio is less than1, it means that stockholders’ equity is more than the fixed assets and  the stockholders’ equity is financing not only the fixed assets but also a part of the working capital.

Different industries have different norms. Generally a ratio of0.60 to0.70 (or60% to70%, if expressed in percentage) is considered satisfactory for most of the industrial undertakings.

Fixed assets to stockholders’ equity ratio is used as a complementary ratio to proprietary ratio.

can it be called even Quick Ratio - a measure of the amount of liquid assets available to offset current ... since it indicates the creditor's have a greater stake in the business than the owners. ... and often over valued fixed assets (Fixed Assets / Liabilities + Equity).

cheers

nemani