Equity Multiplier
factor.formula
Average total assets calculation formula:
The company's average asset size during the reporting period is calculated by taking the average of the total assets at the beginning and end of the period to more accurately reflect the level of asset holdings during the period.
The calculation formula for the average total equity attributable to the parent company is:
The average equity attributable to shareholders of the parent company during the reporting period is calculated using the average of the equity attributable to shareholders of the parent company at the beginning and end of the period to more accurately reflect the level of shareholders' equity held during the period.
The formula for calculating the financial leverage ratio is:
The financial leverage ratio (equity multiplier) is the ratio of average total assets to average equity attributable to the parent company. The higher the ratio, the higher the degree of debt financing used by the company and the greater the financial leverage effect.
This factor measures a company's level of financial leverage by calculating the ratio of average total assets to average equity attributable to the parent company.
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The average total assets during the reporting period are the average of the total assets at the beginning and end of the period. Total assets include all assets owned by the company, such as cash, accounts receivable, fixed assets, etc.
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Refers to the total value of assets owned by the company at the beginning of the reporting period.
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Refers to the total value of assets owned by a company at the end of the reporting period.
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The average equity attributable to the parent company's shareholders during the reporting period is the average of the equity attributable to the parent company's shareholders at the beginning and end of the period. This equity represents the company's owners' share of the company's net assets, excluding minority interests.
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Refers to the total equity attributable to the parent company's shareholders at the beginning of the reporting period.
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Refers to the total equity attributable to the parent company's shareholders at the end of the reporting period.
factor.explanation
The financial leverage ratio reflects the company's ability to support its asset size through debt financing. The higher the value, the more the company uses debt to operate, which also means that the company faces higher financial risks, because high debt levels may increase the company's debt repayment pressure during economic downturns. When making quantitative investments, this indicator can be used to measure the company's risk level and potential returns, and may be used in combination with other factors to develop a more comprehensive investment strategy. For example, make comparisons within the industry to understand the company's leverage level, or combine profitability indicators to evaluate the company's operating conditions.