Creditors' equity

Creditors' equity is the proportion of assets that an organization is financing with credit extended to it by creditors. It is essentially the total amount of liabilities on the balance sheet, though a case can be made that wages payable is actually employees' equity, since this is essentially credit extended to the firm by employees. A high ratio of liabilities to assets implies that a business is maintaining a low equity level, thereby using creditors to enhance its return on equity.