Finance Formulas / July 19, 2018 / Alia Marquez
Accounts receivable refers to the outstanding invoices a company has or the money clients owe the company. The phrase refers to accounts a business has a right to receive because it has delivered a product or service. Accounts receivable, or receivables represent a line of credit extended by a company and normally have terms that require payments due within a relatively short time period, ranging from a few days to a fiscal or calendar year.
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. It is often used as a capital budgeting threshold for required rate of return. A firm's cost of equity represents the compensation the market demands in exchange for owning the asset and bearing the risk of ownership. The traditional formulas for cost of equity (COE) are the dividend capitalization model and the capital asset pricing model.
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