 The equity multiplier, which is sometimes called the leverage ratio, is part of the Dupont analysis. It measures the impact of debt financing on profitability. So the equity multiplier is a measure of profitability. The equity multiplier is calculated as average total assets divided by average common stockholders' equity. Common stockholders' equity is all of the stockholders' equity minus the preferred stock. Here is a balance sheet from our sample company. We'll use the highlighted total assets to determine the equity multiplier, and we'll use the highlighted total equity and preferred stock to determine the average common equity. For 2016, the average total assets divided by average common equity gives us an equity multiplier of 1.49, which is on the low side. This means that this company doesn't use debt financing very much as a way to improve profitability.