The proportion of common shareholders’ equity to long-term financing of a company. In other words, this ratio relates common stock and retained earnings to total capitalization:
For example, if a company has $12 million in retained earnings, $66 million in common stock and $90 million in total capitalization, then:
Common stock ratio=(66 m+ 12 m)/ 90 m= 86.67%
That means the company depends on self and internal financing to the extent of 86.67% of long-term financing.
