Equity multiplier

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.
References in periodicals archive ?
H3A: Equity Multiplier (EM) influences Returns on Equity (ROE).
We can instead just multiply our asset turnover to our net income margin to our equity multiplier.
Figure 5 shows that the equity multiplier shows a high convergence among all accounting standards.
To measure homeowner exposure to changes in house values, we use data from the Financial Accounts of the United States and the Survey of Consumer Finances to create a home equity multiplier and show how the size of the multiplier depends on total mortgage debt in the economy.
The basis for the analysis has been the decomposition of the rates of return, in which as the starting point there has been adopted the equation of Du Pont model, in which the return on equity (ROE) is recognised as the product of the return on assets (ROA) and equity multiplier (MK) or, more broadly, in the form of the product of the return on sales (ROS), the total asset turnover (ROT) and the equity multiplier (MK):
It can be more completely expressed as return on assets (ROA) relative to an equity multiplier or, more simply, the degree of financial leverage at a bank.
The extended DuPont equation is a method of calculating a firm's return on equity (ROE) by utilizing the profit margin (PM), total asset turnover (TATO) and equity multiplier (EM).
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.
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.
The equity multiplier has been bumpy over the last 11 quarters, as equity had been increasing faster than the increase in total assets.
There is a financial ratio called equity multiplier that is fairly simple to compute.
2] The urban banks also tend to be more leveraged, as indicated by their higher equity multiplier (the ratio of assets to equity capital).