Proprietory ratio is the relationship between shareholders' fund and total assets of company. It is also called equity ratio or Shareholders' Funds to Total Assets Ratio or Net Worth to Total Assets Ratio. This ratio tells the percentage of Shareholders' which has been invested money  in total assets.

Formula of Proprietary Ratio If this ratio is 100%. It means whole money which was invested in the total assets, is of shareholders' invested capital. It this Ratio is just 10%, it means, company has just taken 10% of total purchased assets from shareholders. Other 90% money is from debt.

For Example

Total shareholders' fund is Rs. 4,00,000

Total Assets are Rs. 6,00,000

Proprietory Ratio is =  4,00,000/ 6,00,000 = 66.67 %

Interpretation of Proprietory Ratio

In above example, we find 66.67% as Proprietory ratio. It means Rs. 66.67 in total asset of Rs. 100 is of shareholders. Other money in total assets is of creditors. .

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Accounting Education: Proprietary Ratio
Proprietary Ratio