Equity multiplier is a tool to assess the company’s leverage. It tells us the number of assets that are financed by stockholders’ equity instead of debt.

Equity multiplier = Total Assets / Total Stockholders’ equity

This measure tells us the level of equity or debt finance in a company, just like the capital structure. The company finances all its assets either through equity or through debt. When the equity multiplier is showing a high number, this means that the assets are mostly financed with debt. This shows that the company is highly leveraged.

When the equity multiplier is smaller, it means that the assets are mostly financed with equity and that the company is less leveraged. This is generally considered a stable condition.

View More Corporate Finance Definitions

Find the following financial ratios for Smolira Golf Corp. (use

Dan Ervin was recently hired by East Coast Yachts to assist the

Assuming the following ratios are constant, what is the sustainable growth

If Jares, Inc., has an equity multiplier of 1.

If Roten Rooters, Inc., has an equity multiplier of 2

Needham Pharmaceuticals has a profit margin of 3% and an equity

If Roten Rooters, Inc., has an equity multiplier of 1.27,

A firm has a profit margin of 2% and an equity

Bartley Barstools has an equity multiplier of 2.4, and

If Wilkinson, Inc., has an equity multiplier of 1.

Show All