Yes you're right that it's related to A = L + O/E
All assets are funded by either L or O/E so it's usually one or the other. If there's a high debt ratio, it generally means high amounts of liabilities and lower assets. If the owner contributes assets, that increases assets, thus decreasing debt ratio, since there's more of a reliance on the owner.
Accordingly, capital also increases, which decreases ROI (unless the assets are productively used to generate profit).
