Leverage
What is Financial Leverage (Equity Multiplier)?
Financial leverage measures how much a company amplifies returns (and risks) by using debt, the equity multiplier in the DuPont analysis framework.
Formula
Equity Multiplier = Total Assets ÷ Shareholders' Equity
How to Interpret
Higher leverage amplifies both ROE and risk. DuPont analysis decomposes ROE into margins × turnover × leverage.
Typical Ranges
1.5-2.5x for most companies. Higher for banks and financial institutions.