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.
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).
