What does WACC mean in Accounting?
This page is about the meanings of the acronym/abbreviation/shorthand WACC in the Business field in general and in the Accounting terminology in particular.
Submitted by paul8539 on December 18, 2009
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Definition
What does WACC mean?
- Weighted average cost of capital
- The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of capital. Importantly, it is dictated by the external market and not by management. The WACC represents the minimum return that a company must earn on an existing asset base to satisfy its creditors, owners, and other providers of capital, or they will invest elsewhere.Companies raise money from a number of sources: common stock, preferred stock, straight debt, convertible debt, exchangeable debt, warrants, options, pension liabilities, executive stock options, governmental subsidies, and so on. Different securities, which represent different sources of finance, are expected to generate different returns. The WACC is calculated taking into account the relative weights of each component of the capital structure. The more complex the company's capital structure, the more laborious it is to calculate the WACC. Companies can use WACC to see if the investment projects available to them are worthwhile to undertake.
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"WACC." Abbreviations.com. STANDS4 LLC, 2024. Web. 13 Jun 2024. <https://www.abbreviations.com/term/100593>.
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