What is Return on Investment (ROI)? Return on investment (ROI) is a financial ratio used to calculate the benefit an investor will receive in relation to their investment cost. It is most commonly measured as net income divided by the original capital cost of the investment. The higher the ratio, the greater the benefit earned. This...
What are leverage ratios? A leverage ratio is any kind of financial ratio that indicates the level of debt incurred by a business entity against several other accounts in its balance sheet, income statement, or cash flow statement. These ratios provide an indication of how the company’s assets and business operations are financed (using debt...
What is Cost of Debt? The cost of debt is the return that a company provides to its debtholders and creditors. These capital providers need to be compensated for any risk exposure that comes with lending to a company. Since observable interest rates play a big role in quantifying the cost of debt, it is relatively...
Guide to financial statement analysis The main task of an analyst is to perform an extensive analysis of financial statements. In this free guide, we will break down the most important methods, types, and approaches to financial analysis. This guide is designed to be useful for both beginners and advanced finance professionals, with the main...
Definition of WACC A firm’s Weighted Average Cost of Capital (WACC) represents its blended cost of capital across all sources, including common shares, preferred shares, and debt. The cost of each type of capital is weighted by its percentage of total capital and they are added together. This guide will provide a detailed breakdown of what...
