Investment Evaluation & Analysis

Beta: What It Is and How to Calculate It

Beta, in the context of finance and investing, refers to a measurement of the volatility, or systematic risk, of a security or a portfolio compared to the market as a whole. Understanding beta is crucial for small business owners and entrepreneurs because it not only influences investment decisions but also provides insights into the risk profile of their business or industry.

Try our beta calculator, to simplify the process of determining your beta.

Break-Even Analysis

Break-even analysis is a financial calculation used to determine the point at which a business's revenues equal its costs, indicating the minimum sales volume needed to avoid losses. We break down the key components of a break-even analysis and provide an example calculation.

Try our break-even calculator to understand when your business idea begins making money.

Cost of Equity

The cost of equity is one of the two components of your company’s capital structure, with the cost of debt being the other. It plays a major role in determining your company’s weighted average cost of capital (WACC), which is commonly used as the discount rate in net present value (NPV) analysis of potential investment decisions such as a new product line, facilities expansion, or an acquisition.

Internal Rate of Return (IRR)

The internal rate of return (IRR) is a financial metric used to evaluate the potential profitability of an investment or project. It represents the discount rate at which the net present value (NPV) of all future cash flows generated by the investment becomes zero.

Use our IRR calculator to understand the return you can expect on potential business investments.

Net Present Value (NPV)

Net Present Value (NPV) is an essential financial concept particularly relevant for small and medium business (SMB) owners and entrepreneurs who are often faced with decisions about where to allocate their limited resources. NPV is a calculation that determines the value of an investment, or a project, in today's dollars, considering all future cash flows and the time value of money.

Try our NPV Calculator to see if your business project or investment is expected to be profitable.

Weighted Average Cost of Capital (WACC)

The cost of capital, a common proxy for the discount rate in investment analysis, also reflects the risk associated with a business. Higher risks typically lead to a higher cost of capital. By understanding this relationship, businesses and entrepreneurs can make more informed decisions about risk-taking in their business strategies. It guides them in undertaking projects that align with their risk appetite and return expectations.

Curious about what your company’s WACC is? Try our WACC calculator today.