Equity Multiplier

Definition

Total assets divided by total equity, showing how much you're leveraging debt to finance your assets. Higher numbers mean you're living dangerously close to the edge.

Example Usage

Our equity multiplier of 3.5 means for every dollar of equity, we have $3.50 in assets financed with debt.

Origin

Financial ratio analysis terminology from modern portfolio theory.

Fun Fact

Banks love high equity multipliers because they mean more debt outstanding; regulators are less thrilled.

Source: Financial ratio analysis

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