The Equity Multiplier is a risk indicator that measures the portion of a company’s assets that is financed by stockholder's equity rather than by debt. It is calculated by dividing a company's total asset value by its total shareholders' equity.A high equity multiplier means that the company has more liabilities than assets, and it is financed primarily with debt. This makes the company more risky because if creditors demand their money back, the company may not have enough cash to pay them off.Conversely, a lower equity multiplier indicates that the company has more assets financed through stockholders' investments, making it less risky overall. While not foolproof, the equity multiplier can be an important tool for assessing a company's overall financial health and risk level.
