Why leaders with financial savvy have an edge.

My company is facing headwinds, Resources are scarcer than they used to be. And there is more competition for scarce resources. In this situation, how do executives make objective investment decisions in regions and technologies, without the climate turning political?


The answer is making decisions as objective as possible, driven by:

  1. Strategies sustainable in the long-term
  2. Dependable recovery of the expected return on investment
  3. Cost-effective utilization of dollars.

In this situation, leaders who have financial savvy have an edge over their peers. These are leaders who can make back-of-the-envelope calculations to show the return on investment. They are more likely to attract investment to their projects or proposals.

Here is an article upon cost of capital from the HBR. See if you can answer the following questions:

  1. What is capital?
  2. What is debt and equity?
  3. How to calculate the cost of capital for debt funding?
  4. How to calculate the cost of capital for equity funding?
  5. What is beta?
  6. What is the market rate of return for equity?
  7. What is the risk-free rate of return?
  8. How is the Weighted Average Cost of Capital (WACC) calculated?
  9. How not to apply the WACC?

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