A financial analyst is in the process of estimating the cost of capital of Gewicht GmbH. The following information is obtained from the company web pages. Market value of debt: $50 million • Market value of equity: $600 million Table 1. Primary competitors and capital structures (in millions) Competitor A B ● C Market value of Market value of debt equity $25 $101 $40 $50 $190 $60

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Financial Ratios

A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.

Return on Equity

The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.