Financial Statement Analysis
 Ratio Analysis of Financial Statements (Formula, Types, Excel)
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 Ratio Analysis
 Liquidity Ratios
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 Liquidity
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 Days Inventory Outstanding
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 Cash Conversion Cycle
 Cash Conversion Cycle (CCC) Formula
 Fixed Asset Turnover Ratio Formula
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 Working Capital Turnover Ratio
 Profitability Ratios
 Profitability Ratios Formula
 Common Size Income Statement
 Vertical Analysis of Income Statement
 Profit Margin
 Gross Profit Margin Formula
 Gross Profit Percentage
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 EBIT Margin Formula
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 EBIDTA Margin
 Degree of Operating Leverage Formula (DOL)
 NOPAT Formula
 OIBDA
 Earnings Per Share
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 Return on Equity (ROE)
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 ROIC Formula (Return on Invested Capital)
 Return on Investment Formula (ROI)
 ROIC vs ROCE
 ROE vs ROA
 CFROI
 Cash on Cash Return
 Return on Total Assets (ROA)
 Return on Average Capital Employed
 Capital employed Employed
 Return on Average Assets (ROAA)
 Return on Average Equity (ROAE)
 Return on Assets Formula
 Return on Equity Formula
 DuPont Formula
 Net Interest Margin Formula
 Earnings Per Share Formula
 Diluted EPS Formula
 Contribution Margin Formula
 Unit Contribution Margin
 Revenue Per Employee Ratio
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 EBIT vs EBITDA
 EBITDAR
 Capital Gains Yield
 Tax Equivalent Yield
 LTM Revenue
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 Capitalization Rate
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 Comparative Income Statement
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 Efficiency Ratios
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 Debt to Equity Ratio
 Debt Coverage Ratio
 Debt Ratio
 Debt to Asset Ratio Formula
 Coverage Ratio
 Coverage Ratio Formula
 Debt to Income Ratio Formula (DTI)
 Capital Gearing Ratio
 Capitalization Ratio
 Interest Coverage Ratio
 Times Interest Earned Ratio
 Debt Service Coverage Ratio (DSCR)
 DSCR Formula (Debt service coverage ratio)
 Financial Leverage Ratio
 Financial Leverage Formula
 Degree of Financial Leverage Formula
 Net Debt Formula
 Leverage Ratios
 Leverage Ratios Formula
 Operating Leverage vs Financial Leverage
 Current Yield
 Debt Yield Ratio
 Solvency Ratio Formula
Equity Multiplier Formula
Equity multiplier compares the total assets of the company with the shareholders’ equity of the firm. This is a financial leverage ratio which helps to find out how much assets of the firm is financed by the shareholders’ equity.
Here’s the equity multiplier formula –
Example of Equity Multiplier Formula
Here’s a practical example of equity multiplier formula.
Tee Wear has the following information –
 Current Assets – $36,000
 Noncurrent Assets – $144,000
 Total Shareholders’ Equity – $540,000
Find out the equity multiplier of Tee Wear.
First, we will find out the total assets.
 Total assets = (Current Assets + Noncurrent Assets) = ($36,000 + $144,000) = $180,000.
 Total shareholders’ equity is already given as $540,000.
Using the formula of equity multiplier, we get –
 Equity multiplier = Total Assets / Total Shareholders’ Equity = $180,000 / $540,000 = 1/3 = 33.33%.
Depending on the industry standard, we can figure out whether this ratio is higher or lower. For that, every investor needs to look at other companies under similar industry and also glance at other financial ratios.
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Equity Multiplier – Godaddy vs Facebook
 We note from the above graph that Godaddy has a higher equity multiplier at 6.73x, whereas, Facebook’s Equity Multiplier is lower at 1.09x.
 This implies that Godaddy has a higher amount of assets per unit equity and is overdependent on debt to finance its assets. Whereas, Facebook has a very Equity Multiplier (~1.09) meaning that it is literally independent of debt.
Explanation of Equity Multiplier Formula
In equity multiplier formula, there are two components that need to be discussed.
 First, we have the total assets. In total assets, we will include both current assets and noncurrent assets. Examples of current assets are debtors, inventories, prepaid expenses etc. And examples of noncurrent assets are building, machinery, plants, furniture etc. If you’re trying to find the total assets, you will find it in the balance sheet of the company.
 Second, we have total shareholders’ equity. We all know that shareholders’ equity is one of the most important four financial statements that every investor should look at. Under shareholders’ equity, we will include both common shares and preferred shares.
This ratio is a pretty useful ratio for all investors since it helps them understand the financial leverage of a company.
Use of Equity Multiplier Formula
By using this multiplier, an investor is able to know whether a company invests more in debt or more in equity.
 If the equity multiplier ratio is higher, it indicates that the company is too dependent on the debt for its financing. It also means that investing in the company would be too risky for an investor.
 If the equity multiplier ratio is lower, it depicts that the company is mainly sourced by equity and debt financing is low. It also means that the company doesn’t have the much financial leverage to grow well in near future.
 The idea of finding out the equity multiplier formula is to balance both – debt and equity ratio. There’s no rule of thumb, but if a company has a debtequity ratio of 2:1; it can be said that it’s maintaining a great balance between debt and equity.
As you can’t know the true picture of the company by just looking at one ratio; you don’t know much by only looking at equity multiplier ratio. You also need to look at dividendrelated ratios, profitability ratios, debtequity ratio, and other financial ratios to have a holistic view of the approach of the company. And looking at all ratios will also give you a solid base to make a prudent decision.
Equity Multiplier Calculator
You can use the following Equity Multiplier Calculator
Total Assets  
Total Shareholders' Equity  
Equity Multiplier Formula =  
Equity Multiplier Formula = 


Equity Multiplier in Excel (with excel template)
Let us now do the same example above in Excel. This is very simple. You need to provide the two inputs of Total Assets and Equity Multiplier. You can easily calculate the equity multiplier ratio in the template provided.
First, we will find out the total assets.
Now, We will find the equity multiplier.
Recommended Articles
This has been a guide to Equity Multiplier Formula, practical examples, and equity multiplier calculator along with excel templates. You may also have a look at these articles below to learn more about Financial Analysis
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