The Equity Multiple of an investment is a ratio used to help understand total cash return over the life of an investment. The ratio is equity to total net profit plus the total equity invested divided by the total equity invested. Equity Multiple is one tool used to evaluate an investment opportunity, particularly investments with longer hold periods. It does not discount to present value and does not take risk or other variables into account and should not be looked at in isolation.
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Equity Multiple = (Total Profit + Max. Equity Invested) / (Max. Equity Invested)