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Equity Multiplier

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Equity multiplier
Total assets divided by total common stockholders' equity; the total assets per dollar of stockholders' equity.

Leverage Ratio
In risk analysis, any ratio that measures a company's leverage. One example of a gearing ratio is the long-term debt/capitalization ratio, which is calculated by taking the company's long-term debt and dividing it by its long-term debt added to its preferred and common stock. Another example is a simple debt-to-equity ratio, which is calculated by dividing total debt by total equity. Generally, companies with higher leverage as determined by a leverage ratio are thought to be more risky because they have more liabilities and less equity. A leverage ratio is also called a gearing ratio or an equity multiplier.

Equity Multiplier

What Does Equity Multiplier Mean?

A measure of financial leverage calculated as Total Assets/Total Stockholders' Equity. Like all debt management ratios, the equity multiplier is a way of examining how a company uses debt to finance its assets. Also known as the financial leverage ratio or leverage ratio.

Investopedia explains Equity Multiplier

In other words, this ratio shows a company's total assets per dollar of stockholders' equity. A higher equity multiplier indicates higher financial leverage, which means the company is relying more on debt to finance its assets.

Related Terms:
Asset
Current Ratio
Debt/Equity Ratio
Leverage
Shareholders' Equity



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Marketing and shareholder value The principal key performance indicator for shareholder value is ROE (return on equity), which has two drivers, ROA (return on assets), and the equity multiplier (reciprocal of capital/assets ratio) or leverage factor.
[2] The urban banks also tend to be more leveraged, as indicated by their higher equity multiplier (the ratio of assets to equity capital).
Data Analysis We tested the first hypothesis by examining the return on assets (ROA) and return on equity (ROE), profit margin (MARGIN) and equity multiplier (MULTIPLIER) of firms over a 14 year period, 1982-1995.
 
 
 
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