What is the equity compensation expense and what is the cost of equity capital?

As a remuneration expense for internal managers of an enterprise, equity remuneration expenses are essentially the same as annual salaries, bonuses and retirement benefits, which are all transfers of the company's interests to employees.

**Options are recognized as expenses in the income statement, and are recognized as expenses for different subaccounts depending on the department to which the employee belongs. For example, product development expenses are options given to employees in the IT R&D department.

It is the cost of equity capital, the rate of return required by investors when investing in the equity of a business. There are many ways to estimate the cost of equity capital, and the most commonly used in the world are the dividend growth model, the capital asset pricing model and the arbitrage pricing model. It is calculated based on the theory of finance, and the return on investment is required.

The "cost of equity capital" is the required return on investment calculated according to the theory of finance. Assuming that the cost of equity capital of a listed company is 10%, it means that the average return of investors must be 10% to compensate for the risk of investing in that **.

Equity is the right of shareholders to obtain economic benefits from the company and participate in the operation and management of the company based on their shareholder qualifications.

Equity is first divided into two categories: capital equity and operation and management equity, that is, economic rights and political rights. First of all, the equity of these two parts should be clearly determined, and the equity of these two parts should be distributed not from the perspective of people, but according to the perspective of these two categories.

The cost of capital refers to the opportunity cost of invested capital. This cost is not the cost actually paid, but a lost gain, which is the gain from other investment opportunities that are abandoned by using the capital for the investment in this project, hence the term opportunity cost.

The cost of equity capital is the rate of return required by investors when investing in the equity of an enterprise. There are many ways to estimate the cost of equity capital, and the most commonly used in the world are the dividend growth model, the capital asset pricing model and the arbitrage pricing model.

Equity capital.

The capital that the enterprise has obtained and owned for a long time in accordance with the law and is independently allocated and used. It has the following attributes: 1:

The ownership of equity capital is vested in the enterprise. 2: Enterprises have the right to operate according to equity.

China's equity capital, mainly including: capital, provident fund, surplus reserve and undistributed profits, etc., can be included in the two categories of paid-in capital (or share capital) and retained earnings respectively.

Circular of the State Administration of Taxation on Strengthening the Administration of Enterprise Income Tax on Income from Equity Transfer of Non-resident Enterprises.

Article 3 of Guo Shui Han [2009] No. 698) stipulates that "the income from equity transfer refers to the difference between the equity transfer price and the equity cost price."

The equity transfer price refers to the amount received by the equity transferor for the transferred equity, including cash, non-monetary assets or equity. If the shareholding enterprise has undistributed profits or after-tax deposits, etc., the amount of the shareholder's retained earnings right transferred by the equity transferor together with the equity shall not be deducted from the equity transfer price.

The cost price of equity refers to the amount of capital actually paid by the equity transferor to the Chinese resident enterprise when investing in the shares, or the amount actually paid to the original transferor of the equity when purchasing the equity. ”

Net profit margin on equity is net.

Bai profit divided by the right of the owner

The cost of equity capital is a discount rate for calculating the equity price royalty. Net profit margin on equity is an indicator of a company's earnings. If they are all regarded as the return rate of shareholders, the cost of equity capital is the necessary rate of return for shareholders to invest in the enterprise, and they will not invest below this rate of return, and the net interest rate of equity may be greater or smaller than the cost of equity capital, and if the net interest rate of equity is greater than the cost of equity capital, shareholders may choose to invest in the company.

Net profit margin on equity = net profit available for distribution to common shareholders Average common shareholders' equity, profitability metrics and core indicators of DuPont analytical system.

The cost of equity capital is the rate of return required by investors when investing in the equity of an enterprise. The most commonly used methods for estimating the cost of equity capital are dividend growth models, capital asset pricing models, etc. It's an opportunity cost, but it's also a risk.

The cost of capital of the right spine type refers to the price paid by the enterprise to obtain funds through the issuance of ordinary **, which is equal to the dividend yield plus the return on capital gains, that is, the return on the heart of shareholders.

Cost of Equity Capital: is the opportunity cost of the use of equity capital. The average social cost of capital should be regarded as the cost of equity capital, and the interest rate of long-term bank borrowings (more than one year) can be used as the cost rate of equity capital in specific operations.

The recognition of the cost of equity capital should be combined with the amount of capital used and the time of use, that is, how much capital is used to recognize more and less cost, the length of use and the cost of capital are combined, and when it is used and when it is recognized.

The cost of equity capital is the rate of return required by investors when investing in the equity of an enterprise.

Capital Asset Pricing Model = Risk-Free Rate + Beta of ** * (Yield of Market Portfolio - Risk-Free Rate).

The dividend growth model is the current share price = dividend for the next period (**cost of capital - growth rate).

The cost of equity capital refers to the price paid by the enterprise to obtain funds through the issuance of ordinary **, which is equal to the dividend yield plus the return on capital gains, that is, the return on the hearts of shareholders. So, how is this rate of return calculated? Let's take a look at the following with this question in mind!

Estimation of the cost of equity capital:

In terms of measuring various types of capital costs (mainly equity capital costs), the most widely used tools are: capital asset pricing method (CAPM), multi-factor model method, historical average income method, dividend discount method, dividend growth model method, etc. These methods mainly calculate the cost of capital of a business based on the actual earnings of the company.

The most widely used methods are the CAPM method and the multi-factor model method, which attempt to use various risk factors of capital assets to maximize their returns. Since the investor's income from capital assets is the cost of capital that the company should pay for it, the capital gain calculated in this way is the cost of capital faced by the enterprise. However, the application of this method is premised on the fact that the value of the enterprise is relatively stable and will not change during the period.

In addition, the historical average return method is also widely used because it is relatively easy to apply. However, the dividend discount method and the dividend growth model method are more difficult to carry out future dividends, and their application scope is relatively limited.