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The Rule of 72 definition

Accounting Tools

years) Related AccountingTools Courses Corporate Finance Essentials of Business Math Financial Analysis The Rule of 72 is fairly accurate for low rates of return, and becomes increasingly inaccurate when higher rates of return are incorporated into the calculation. 72 ÷ 1 = 72.0 years) 2% interest rate. (72 72 ÷ 2 = 36.0

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Rule of 69 definition

Accounting Tools

Related Courses Corporate Finance Essentials of Business Math Financial Analysis What is the Rule of 69? The Rule of 69 is used to estimate the amount of time it will take for an investment to double, assuming continuously compounded interest. to the result.

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Opportunity cost of capital definition

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Related Courses Capital Budgeting Corporate Finance Financial Analysis What is the Opportunity Cost of Capital? The opportunity cost of capital is the incremental return on investment that a business foregoes when it elects to use funds for an internal project, rather than investing cash in a marketable security.

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Leverage definition

Accounting Tools

Related AccountingTools Courses Corporate Finance Financial Analysis The Interpretation of Financial Statements Related Articles Leverage Ratios Leveraged Lease This issue can be mitigated by restricting the amount of debt that a business takes on, as well as by maintaining a reasonable cash reserve.

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Reverse leverage definition

Accounting Tools

Related AccountingTools Courses Corporate Finance Financial Analysis The Interpretation of Financial Statements Related Article Leverage Ratios After one year, he finds that the actual net after-tax return on his purchase of the manufacturing company is just 3%.

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Annualized rate definition

Accounting Tools

Related Courses Corporate Finance Financial Analysis What is the Annualized Rate? The annualized rate is the computed amount of return that would be realized if a short-term investment were to be extrapolated for a period of one year.

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Financial gearing definition

Accounting Tools

How to Calculate Financial Gearing The calculation used for financial gearing is to add together all forms of debt and then divide by the total amount of equity. The company would most definitely be considered highly geared. The company currently has $2,000,000 of equity, so there is now a 5x ratio of debt to equity.