Equity Multiplier

Calculate the equity multiplier, a solvency ratio that measures the degree to which a company uses borrowed money (debt) to finance its operations and growth.

The equity multiplier helps assess the financial leverage of a company by indicating how much of its assets are financed by equity versus debt. A higher equity multiplier suggests that the company relies more on debt financing, which can amplify returns but also increases financial risk. Conversely, a lower equity multiplier indicates a larger portion of assets is financed by equity, potentially lowering financial risk.

The formula is as follows:

Also known as: financial leverage multiplier.

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Calculate the Equity Multiplier in Python

The Equity Multiplier is available in the Ratios module of the open-source Finance Toolkit. Install it with:

pip install financetoolkit -U

Then call get_equity_multiplier as shown below.

from financetoolkit import Toolkit

toolkit = Toolkit(["AAPL", "TSLA"], api_key="FINANCIAL_MODELING_PREP_KEY")

equity_multipliers = toolkit.ratios.get_equity_multiplier()

Which returns:

Parameters

get_equity_multiplier accepts the following parameters:

• rounding (int, optional): The number of decimals to round the results to. Defaults to 4.
• growth (bool, optional): Whether to calculate the growth of the ratios. Defaults to False.
• lag (int | str, optional): The lag to use for the growth calculation. Defaults to 1.
• standardize (bool, optional): Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False.
• trailing (int): Defines whether to select a trailing period. E.g. when selecting 4 with quarterly data, the TTM is calculated.

Related Solvency Ratios

The Ratios module page introduces the module, and the sidebar lists all of its functions.