Finance / July 19, 2018 / Hana Cannon
Cost of Equity is the rate of return a shareholder requires for investing equity into a business. The rate of return an investor requires is based on the level of risk associated with the investment, which is measured as the historical volatility of returns. A firm uses cost of equity to assess the relative attractiveness of investments, including both internal projects and external acquisition opportunities. Companies typically use a combination of equity and debt financing, with equity capital being more expensive.
Asset turnover ratio is the ratio of a company's sales to its assets. It is an efficiency ratio which tells how successfully the company is using its assets to generate revenue.
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