What is the equity multiple?

The equity multiple is defined as the ratio of total cash returned to equity invested. This metric is used to assess the performance of an investment, particularly in private equity and real estate. It provides investors with a clear picture of the total return they receive relative to their original investment.

In this context, the equity multiple helps illustrate how effectively a company generates profit relative to the capital that shareholders have put in. A higher equity multiple indicates that an investment is generating significant returns compared to the initial equity investment, which is a key consideration for investors when evaluating the success of their investments.

Understanding this ratio is crucial for making informed financial decisions, as it encapsulates the overall return dynamics of equity investments over time.