Equity Multiplier

Equity Multiplier - an equity multiplier is a measure of leverage. The Equity multiplier formula is derived from taking the total assets and dividing it by common stock holder's equity .The equity multiplier is the amount or percentage of assets owned by each dollar invested in a business. The higher the ratio is the more the company is relying on debt (loans) to finance and run the day to day operations of the business. The lower the ratio, the less the company is relying on debt, to run their operation. Obviously, the lower ratio will look better for investors to invest in the company.