What is an Equity Multiple in Real Estate?
The equity multiplier is a risk indicator. It is used to measure the portion of a company’s assets that is financed by the stockholder’s equity instead of debt. Having a high equity multiplier means that a company is using a high amount of debt to finance its assets. On the flip side, a low equity multiplier means that a company relies less on debt. It is worth noting that a company’s equity multiplier can only be judged as being high or low based on historical standards, the company’s peers, or the industry averages.