Finance / July 19, 2018 / Parker Hardy
Debt to total asset ratio is the ratio indicating the percentage of total assets of the company financed from debt. It is a broad financial parameter used to measures what part of assets are served by liabilities (debt) signifying financial risk. It is one of the solvency ratios and helps in measuring how far the company is capable of meeting its long-term financial obligations.
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.
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