Equity Multiplier

The big formula: Total Assets / Total Shareholder's Equity.

Why does this ratio even matter? Well, it's about creditor risk, really. If a company had a huge asset total and a tiny equity total, then presumably, the assets were acquired by borrowing money...meaning that the company didn't "earn the right" to buy those assets through its own retained earnings.

If it had saved and scrimped rather than borrowed, then its equity total would be large, and it would be a lot closer to the total assets it had. See: Current Ratio. See: Days Sales Outstanding. See: Consolidated Balance Sheet.

Financial ratios get taken with the same number of grains of salt that comprised Lot's wife. They don't always mean much. But bean counters need beans to count so this ratio is one of the few, the proud, the tracked.