Equity Multiplier

Equity Multiplier

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.

Notes:

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.

See also: Asset, Current Ratio, Debt/Equity Ratio, Debt Ratio, Du Pont Identity, Earnings Multiplier, Equity, Leverage, Stockholder's Equity

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Equity multiplier

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