How to Calculate Equity Multiplier
What is Equity Multiplier?
The equity multiplier measures financial leverage — how much of a company's assets are financed by equity versus debt. Equity multiplier = Total assets / Total shareholders' equity. A higher value means more debt financing.
Step-by-Step Guide
- 1Get total assets from the balance sheet
- 2Get total shareholders' equity from the balance sheet
- 3Equity multiplier = Total assets / Total equity
- 4It forms one leg of the DuPont ROE decomposition: ROE = Net margin × Asset turnover × Equity multiplier
Worked Examples
Input
Total assets $1M · Equity $400k
Result
Equity multiplier = 2.5x
$1 of equity supports $2.50 of assets