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Definition of Equity Multiplier

Definition: What is Equity Multiplier Ratio?

Equity Multiplier is the financial leverage ratio which measures the firm’s assets amount that financed by the firm’s shareholder by comparing total assets with total shareholder’s equity.

Definition of Equity Multiplier

This measurement is used to show the percentage of assets financed or owned by the shareholder. This is used for the indication of the company risk to creditors like all financial leverage ratios.

Those companies which depend heavily on the debt financing have high debt financing cost and need to raise more cash flow for the payment of their obligations.

Equity multiplier ratio used by both investors and creditors to find, how the company is leverage.

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