Finance
WACC Explained: How Companies Calculate Their Cost of Capital
Learn how to calculate the weighted average cost of capital (WACC) and why it serves as the discount rate for corporate investment decisions.
·5 min read
All Guides
Cost of Capital and Capital Structure
How firms fund themselves and price risk: WACC, CAPM, capital structure, leverage, and payout policy.
6 guides in this collection
Finance
CAPM: How to Estimate the Cost of Equity
Learn how the Capital Asset Pricing Model estimates the return investors require on a stock based on its risk, and how CAPM feeds into WACC.
·6 min read
Finance
Capital Structure: How Companies Choose Between Debt and Equity
Learn how the mix of debt and equity affects a company's cost of capital, risk profile, and value, and why the right balance depends on the trade-off between tax shields and financial distress.
·8 min read
Finance
Financial Leverage: How Debt Amplifies Earnings Swings
Learn how financial leverage works, how to calculate the degree of financial leverage, and how debt amplifies both gains and losses for equity holders.
·6 min read
Finance
Operating Leverage: How Fixed Costs Amplify Profit Swings
Learn how operating leverage works, how to calculate the degree of operating leverage, and why a company's cost structure determines how much its profits swing with revenue.
·6 min read
Finance
Payout Policy: How Companies Choose Between Dividends and Buybacks
Learn how dividends and share buybacks return capital to shareholders, how each method affects EPS, taxes, and flexibility, and how to measure the total shareholder yield.
·8 min read