What does equity multiplier mean on the CPA exam?
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Equity multiplier. Total assets divided by equity. How many dollars of assets each dollar of equity supports, and one of the three drivers in the DuPont decomposition.
Related terms
- total asset turnover: Sales divided by average total assets.
- total assets: Everything the entity controls that is expected to produce future benefit, added up.
- total liabilities: Everything the entity owes, added up.
- net position: A government's assets plus deferred outflows, less liabilities and deferred inflows.
- net profit margin: Net income divided by sales.
- average total assets: The average of opening and closing total assets, used wherever a period flow like sales is compared to a balance.