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EQUITY MULTIPLIER=Total Assets / Total Stockholders' Equity
Formula to Find the Equity
Equity = Assets -Liabilities Equity is also referred to as the first loss when earnings are depleted. Equity = Common Stock (at Par) + Paid in capital + Pref. Stock + R/E (NI)
To compute for ROE if there is loss and negative equity, divide the company's net income by the stockholders' equity. A negative ROE does not necessarily mean bad news.
ROE divided by ROA isi the equity multiplier, which is also equal to total assets divided by total equity.