Systematic risk is the risk associated with the environment a business operates in. This risk occurs due to external factors and is outside the control of a particular business. This risk applies to the market or market segment, the business operates in, as a whole and not to a particular company or industry. Systematic risk …
The Capital Assets Pricing Model is a finance tool that can be used to derive the cost of capital of a company. It is a tool widely used by companies to find their cost of capital for their equity and debt instruments. Investors also use this tool to find the expected rate of return of …
7 Advantages of Capital Assets Pricing Models (With Explanation) Read More »
The Capital Asset Pricing Model (CAPM) is a tool that investors can use to calculate the rate of return of different investments. This model describes the linear relationship between the systematic risk of an investment and the required rate of return of the investment. It can be used with different investment appraisal techniques when evaluating …
How to use CAPM for investment appraisal? (3 Methods) Read More »
The Capital Assets Pricing Model is a model used b y investors to find the relationship between their required rate of return from an investment and the systematic risk of the investment. It is a tool used by investors and companies to accurately estimate the rate of returns of investments and projects with risks involved. …
9 THE LIMITATIONS OF CAPITAL ASSETS PRICING MODELS Read More »
Introduction The Capital Asset Pricing Model can be referred to as a tool that describes the existing relationship between systematic risk, as well as expected return for assets, including stocks. It is used along the field of finance in order to price securities that have a higher risk profile, in addition to generating expected returns …
Capital Assets Pricing Models: Overview, Formula, Example Read More »
Introduction Business Risks can be defined as factors that a business faces because of which there a risk of the business is failing, or losing out on its profitability. It is very crucial for businesses to be aware of these risks because they need to create a proper hedging strategy that can help them with …
Introduction In order to finance operations, a business has two main options, equity or debt. The mixture of equity and debt finance is referred to as the Capital Structure of the company. As a matter of fact, it can be seen that capital structure is taken very seriously by companies because it has a huge …
Why Would A Company Choose Equity Financing Over Debt Financing? Read More »
Introduction Business Risks tend to be an increasingly important factor in determining the overall ability of the business to sustain and survive in the VUCA (Volatile, Uncertain, Complex, and Ambiguous) world. There are a number of risks which businesses need to equip themselves against. However, in this regard, there are a couple of risks that …
Systematic Business Risk: Definition, and How can the business mitigate it? Read More »
Introduction: Business Risk can be defined as the risks that can adversely impact the business by lowering profitability, or impacting their market share. Therefore, this is something that needs to be taken seriously by the business, in order to ensure that they survive in the already competitive business landscape. In this regard, it is quite …
Unsystematic Business Risk: Definition, Factories, How to Hedges it? Read More »
The Weighted Average Cost of Capital (WACC) is the required rate of return on a business organization. A business organization usually compares a new project’s Internal Rate of Return (IRR) against the organization’s WACC. So, WACC is the minimum rate for an organization to accept an investment project. Despite many advantages, the WACC has many …
Limitations of the Weighted Average Cost of Capital Read More »
