Stock Market Basics 86: WACC Explained — Understanding a Company’s Average Cost of Capital
Stock Market Basics 86: WACC Explained — Understanding a Company’s Average Cost of Capital 3-Line Summary WACC means the weighted average cost a company pays to raise capital through equity and debt. If ROIC shows how much return a company earns on capital, WACC shows the minimum cost the company must overcome. Investors should analyze WACC together with ROIC, interest rates, debt levels, business risk, capital structure, and industry characteristics. Recommended Keywords WACC, weighted average cost of capital, cost of equity, cost of debt, ROIC, capital cost, discount rate, valuation, debt ratio, interest rates, financial statement analysis, investing basics, stock market basics, long term investing Table of Contents What Is WACC? WACC Formula Explained Why WACC Matters What Is Cost of Equity? What Is Cost of Debt? WACC and ROIC What a Low WACC Means What a High WACC Means Interest Rates and WACC Debt Ratio and WACC WACC and Valuation Why Industry Differences Matter Common Mist...