In my ninth (and last) data post for 2025, I look at cash returned by businesses across the world, looking at both the magnitude and the form of that return. I start with a framework for thinking about how much cash a business can return to its owners, and then argue that, in the real world, this decision is skewed by inertia and me-tooism. I also look at a clear and discernible shift away from dividends to stock buybacks, especially in the US, and examine both good and bad reasons for this shift. After reporting on the total cash returned during the year, by public companies, in the form of dividends and buybacks, I scale the cash returned to earnings (payout ratios) and to market cap (yield) and present the cross sectional distribution of both statistics across global companies. The Cash Return Decision     The decision of whether to return cash, and how much to return, should, at least in principle, be the simplest of the three corporate finance decisions, since it does not involve the estimation uncertainties that go with investment decisions and the angst of trading of tax benefits against default risk implicit in financing decisions. In practice, though, there is probably more dysfunctionality in the cash return decision, than the other two, partly driven by deeply held, and often misguided views, of what returning cash to shareholders does or does not do to a business, and partly by the psychology that returning cash to shareholders is an admission that a company's growth days are numbered. In this section, I will start with a utopian vision, where I examine how cash return decisions should play out in a business and follow up with the reality, where bad dividend/cash return decisions can drive a business over a cliff.  The Utopian Version     If, as I asserted in an earlier post, equity investors have a claim the cash flows left over after all needs (from taxes to debt payments to reinvestment needs) are met, dividends should represent the end effect of all of those choices. In fact, in the utopian world where dividends are residual cash flows, here is the sequence you should expect to see at businesses: In a residual dividend version of the world, companies will start with their cash flows from operations, supplement them with the debt that they think is right for them, invest that cash in good projects and the cash that is left over after all these needs have been met is available for cash return. Some of that cash will be held back in the company as a cash balance, but the balance can be returned either as dividends or in buybacks. If companies following this sequence to determine, here are the implications: The cash returned should not only vary from year to year, with more (less) cash available for return in good (bad) years), but also across firms, as firms that struggle on profitability or have large reinvestment needs might find that not only do they not have any cash to return, but that they might have to raise fresh capital from equity investors to keep going.  It also follows that the investment, financing, and dividend decisions, at most firms, are interconnected, since for any given set of investments, borrowing more money will free up more cash flows to return to shareholders, and for any given financing, investing more back into the business will leave less in returnable cash flows.      Seen through this structure, you can compute potential dividends simply by looking for each of the cash flow elements along the way, starting with an add back of depreciation and non-cash charges to net income, and then netting out investment needs (capital expenditures, working capital, acquisitions) as well as cash flow from debt (new debt) and to debt (principal repayments).  While this measure of potential dividend has a fanciful name (free cash flow to equity), it is not only just a measure of cash left in the till at the end of the year, after all cash needs have been met, but one that is easy to compute, since every items on the list above should be in the statement of cash flows.     As with almost every other aspect of corporate finance, a company's capacity to return cash, i.e., pay potential dividends will vary as it moves through the corporate life cycle, and the graph below traces the path: There are no surprises here, but it does illustrate how a business transitions from being a young company with negative free cash flows to equity (and thus dependent on equity issuances) to stay alive to one that has the capacity to start returning cash as it moves through the growth cycle before becoming a cash cow in maturity. The Dysfunctional Version     In practice, though, there is no other aspect of corporate finance that is more dysfunctional than the cash return or dividend decision, partly because the latter (dividends) has acquired characteristics that get in the way of adopting a rational policy. In the early years of equity markets, in the late 1800s,  companies wooed investors who were used to investing in bonds with fixed coupons, by promising them predictable dividends as an alternative to the coupons. That practice has become embedded into companies, and dividends continue to be sticky, as can be seen by the number of companies that do not change dividends each year in the graph below: While this graph is only of US companies, companies around the world have adopted variants of this sticky dividend policy, with the stickiness in absolute dividends (per share) in much of the world, and in payout ratios in Latin America. Put simply, at most companies, dividends this year will be equal to dividends last year, and if there is a change, it is more likely to be an increase than a decrease.     This stickiness in dividends has created several consequences for firms. First, firms are cautious in initiating dividends, doing so only when they feel secure in their capacity to keep generate earnings. Second, since the punishment for deviating from stickiness is far worse, when you cut dividends, far more firms increase dividends than decrease them. Finally, there are companies that start paying sizable dividends, find their businesses deteriorate under them and cannot bring themselves to cut dividends. For these firms, dividends become the driving force, determining financing and investment decisions, rather than being determined by them. This is, of course, dangerous to firm health, but given a choice between the pain of announcing a dividend suspension (or cut) and being punished by the market and covering up operating problems by continuing to pay dividends, many managers choose the latter, laying th e pathway to dividend madness. Dividends versus Buybacks      As for the choice of how to return that cash, i.e., whether to pay dividends or buy back stock, the basics are simple. Both actions (dividends and buybacks) have exactly the same effect on a company’s business picture, reducing the cash held by the business and the equity (book and market) in the business. It is true that the investors who receive these cash flows may face different tax consequences and that while neither action can create value, buybacks have the potential to transfer wealth from one group of shareholders (either the ones that sell back or the ones who hold on) to the other, if the buyback price is set too low or too high.         It is undeniable that companies, especially in the United States, have shifted away from a policy of returning cash almost entirely in dividends until the early 1980s to one where the bulk of the cash is returned in buybacks. In the chart below, I show this shift by looking at the aggregated dividends and buybacks across S&P 500 companies from the mid-1980s to 2024: While there are a number of reasons that you can point to for this shift, including tax benefits to investors, the rise of management options and shifting tastes among institutional investors, the primary reason, in my view, is that sticky dividends have outlived their usefulness, in a business age, where fewer and fewer companies feel secure about their earning power. Buybacks, in effect, are flexible dividends, since companies, when faced with headwinds, quickly reduce or cancel buybacks, while continuing to pay dividends: In the table below, I look at the differences between dividends and buybacks: If earnings variability and unpredictability explains the shifting away from dividends, it stands to reason that this will not just be a US phenomenon, and that you will see buybacks increase across the world. In the next section, we will see if this is happening.     There are so many misconceptions about buybacks that I did write a piece that looks in detail at those reasons. I do want to reemphasize one of the delusions that both buyback supporters and opponents use, i.e., that buybacks create or destroy value. Thus, buyback supporters argue that a company that is buying back its own shares at a price lower than its underlying value, is effectively taking an investment with a positive net present value, and is thus creating value. That is not true, since that action just transfers value from shareholders who sell back (at the too low a price) to the shareholders who hold on to their shares. Similarly, buyback opponents note that many companies buy back their shares, when their stock prices hit new highs, and thus risk paying too high a price, relative to value, thus destroying value. This too is false, since paying too much for shares also is a wealth transfer, this time from those who remain shareholders in the firm to those who sell back their shares.  Cash Return in 2024     Given the push and pull between dividends as a residual cash flow, and the dysfunctional factors that cause companies to deviate from this end game, it is worth examining how much companies did return to their shareholders in 2024, across sectors and regions, to see which forces wins out. Cash Return in 2024     Let's start with the headline numbers. In 2024, companies across the globe returned $4.09 trillion in cash to their shareholders, with $2.56 trillion in dividends and $1.53 trillion taking the form of stock buybacks. If you are wondering how the market can withstand this much cash being withdrawn, it is worth emphasizing an obvious, but oft overlooked fact, which is that the bulk of this cash found its way back into the market, albeit into other companies. In fact, a healthy market is built on cash being returned by some businesses (older, lower growth) and being plowed back into growth businesses that need that capital.     That lead in should be considered when you look at cash returned by companies, broken down by sector, in the table below, with the numbers reported both in US dollars and scaled to the earnings at these companies: To make the assessment, I first classified firms into money making and money losing, and aggregated the dividends and buybacks for each group, within each sector.  Not surprisingly, the bulk of the cash bering returned is from money making firms, but the percentages of firms that are money making does vary widely across sectors. Utilities and financials have the highest percentage of money makers on the list, and financial service firms were the largest dividend payers, paying $620.3 billion in dividends in 2024, followed by energy ($346.2 billion) and industrial ($305.3 billion). Scaled to net income, dividend payout ratios were highest in the energy sector and technology companies had the lowest payout ratios. Technology companies, with $280.4 billion, led the sectors in buybacks, and almost 58% of the cash returned at money making companies in the sector took that form.     Breaking down global companies by region gives us a measure of variation on cash return across the world, both in magnitude and in the type of cash return: It should come as no surprise that the United States accounted for a large segment (more than $1.5 trillion) of cash returned by all companies, driven partly by a mature economy and partly by a more activist investor base, and that a preponderance of this cash (almost 60%) takes the form of buybacks. Indian companies return the lowest percentage (31.1%) of their earnings as cash to shareholders, with the benign explanation being that they are reinvesting for growth and the not-so-benign reason being poor corporate governance. After all, in publicly traded companies, managers have the discretion to decide how much cash to return to shareholders, and in the absence of shareholder pressure, they, not surprisingly, hold on to cash, even if they do not have no need for it. It is also interesting that buybacks seems to be making inroads in other paths of the world, with even Chinese companies joining the party. FCFE and Cash Return     While it is conventional practice to scale dividends to net income, to arrive at payout ratios, we did note, in the earlier section, that you can compute potential dividends from financial statements, Here again, I will start with the headline numbers again. In 2024, companies around the world collectively generated $1.66 trillion in free cash flows to equity: As you can see in the figure, companies started with net income of $6,324 billion, reinvested $4,582 billion in capital expenditures and debt repayments exceeded debt issuances by $90 billion to arrive at the free cash flow to equity of $1.66 trillion. That said, companies managed to pay out $2,555 billion in dividends and bought back $1,525 billion in stock, a total cash return of almost $4.1 trillion.     As the aggregate numbers indicate, there are many companies with cash return that does not sync with potential dividends or earnings. In the picture below, we highlight four groups of companies, with the first two focused on dividends, relative to earnings, and the other two structured around cash returned relative to free cash flows to equity, where we look at mismatches. Let's start with the net income/dividend match up. Across every region of the world, 17.5% of money losing companies continue to pay dividends, just as 31% of money-making companies choose not to pay dividends. Using the free cash flows to equity to divide companies, 38% of companies with positive FCFE choose not to return any cash to their shareholder while 48% of firms with negative FCFE continue to pay dividends. While all of these firms claim to have good reasons for their choices, and I have listed some of them, dividend dysfunction is alive and well in the data.     I argued earlier in this post that cash return policy varies as companies go through the life cycle, and to see if that holds, we broke down global companies into deciles, based upon corporate age, from youngest to oldest, and looked at the prevalence of dividends and buybacks in each group: As you can see, a far higher percent of the youngest companies are money-losing and have negative FCFE, and it is thus not surprising that they have the lowest percentage of firms that pay dividends or buy back stock. As companies age, the likelihood of positive earnings and cash flows increases, as does the likelihood of dividend payments and stock buybacks. Conclusion     While dividends are often described as residual cash flows, they have evolved over time to take on a more weighty meaning, and many companies have adopted dividend policies that are at odds with their capacity to return cash. There are two forces that feed this dividend dysfunction. The first is inertia, where once a company initiates a dividend policy, it is reluctant to back away from it, even though circumstances change. The second is me-tooism, where companies adopt cash return policies to match  their peer groups, paying dividends because other companies are also paying dividends, or buying back stock for the same reasons. These factors explain so much of what we see in companies and markets, but they are particularly effective in explaining the current cash return policies of companies. YouTube Data Updates for 2025 Data Update 1 for 2025: The Draw (and Danger) of Data! Data Update 2 for 2025: The Party continued for US Equities Data Update 3 for 2025: The times they are a'changin'! Data Update 4 for 2025: Interest Rates, Inflation and Central Banks! Data Update 5 for 2025: It's a small world, after all! Data Update 6 for 2025: From Macro to Micro - The Hurdle Rate Question! Data Update 7 for 2025: The End Game in Business! Data Update 8 for 2025: Debt, Taxes and Default - An Unholy Trifecta! Data Update 9 for 2025: Dividend Policy - Inertia and Me-tooism Rule! Data Links Dividend fundamentals, by industry (US, Global, Emerging Markets, Europe, Japan, India, China) Cash return and FCFE, by industry (US, Global, Emerging Markets, Europe, Japan, India, China)

While I was working on my last two data updates for 2025, I got sidetracked, as I am wont to do, by two events. The first was the response that I received to my last data update, where I looked at the profitability of businesses, and specifically at how a comparison of accounting returns on equity (capital) to costs of equity (capital) can yield a measure of excess returns. The second was a comment that I made on a LinkedIn post that had built on my implied equity premium approach to the Indian market but had run into a roadblock because of an assumption that, in an efficient market, the return on equity would equate to the cost of equity. I pointed to the flaw in the logic, but the comments thereafter suggested such deep confusion about what returns on equity or capital measure, and what comprises an efficient market, that I think it does make sense to go back to basics and see if some of the confusion can be cleared up. The Lead In: Business Formation     To keep this example as stripped of complexity as I can, at least to begin, I will start with two entrepreneurs who invest $60 million apiece to start new businesses, albeit with very different economics: The first entrepreneur starts business A, with a $60 million investment up front, and that business is expected to generate $15 million in net income every year in perpetuity. The second entrepreneur starts business B, again with a $60 million investment up front, and that investment is expected to generate $3 million every year in perpetuity. With these characteristics, the accounting balance sheets for these companies will be identical right after they start up, and the book value of equity will be $60 million in each company.  The return on equity is an entirely accounting concept, and it can be computed by dividing the net income of each of the two businesses by the book value of equity: Return on equity for Business A  = Net income for Business A / Book Value of Equity for Business A = 15/60 = 25% Return on equity for Business B  = Net income for  Business B / Book Value of Equity for Business B = 3/60 = 5% Assume that both these businesses have the same underlying business risk that translates into a cost of equity of 10%, giving the two businesses the following excess returns: Excess Return for Business A = Return on equity for Business A – Cost of equity for Business A = 25% -10% = 15% Excess Return for Business B = Return on equity for Business B – Cost of equity for Business B = 5% -10% = -5% In the language of my last post, the first business is a good one, because it creates value by earning more than your money would have earned elsewhere on an investment of equivalent risk, and the second is a bad one, because it does not.     The return on equity may be an equation that comes from accounting statements, but in keeping with my argument that every number needs a narrative, each of these numbers has a narrative, often left implicit, that should be made explicit. On business A, the story has to be one of strong barriers to entry that allow it to sustain its excess returns in perpetuity, and those could include anything from a superlative brand name to patent protection to exclusive access to a natural resource. In the absence of these competitive advantages, these excess returns would have faded very quickly over time. On business B, you have a challenge, since it does seem irrational that an entrepreneur would enter a bad business, and while that irrationality cannot be ruled out (perhaps the entrepreneur thinks that earning any profit makes for a good business), the reality is that outside events can wreak havoc on the bet paid plans of businesses. For instance, it is possible that the entrepreneur’s initial expectations were that he or she would earn much more than 5%, but a competitor launching a much better product or a regulatory change could have changed those expectations. In sum, the return on equity and its more expansive variant, the return on invested capital, measure what a company is making on the capital it has invested in business, and is a measure of business quality. The Market Launch     Assume now that the owners of both businesses (A and B) list their businesses in the market, disclosing what they expect to generate as net income in perpetuity. Investors in equity markets will now get a chance to price the two companies, and if markets are efficient, they will arrive at the following: Thus, a discerning (efficient) market would value business A, with $15 million in net income in perpetuity at $150 million, while valuing business B, with $3 million in net income in perpetuity, at $30 million. If you are wondering why you would discount net income, rather than cash flow, the unique features of these investments (constant net income, no growth and forever lives) makes net income equal to cash flow.     Even with this very simplistic example, there are useful implications. The first is that if markets are efficient, the price to book ratios will reflect the quality of these companies. In this example, for instance, business A, with a market value of equity of $150 million and a book value of equity of $60 million, will trade at 2.50 times book value, whereas company B with a market value of equity of $30 million and a book value of equity of $60 million will trade at half of book value. Both companies would be fairly valued, though the first trades at well above book value and the second at well below, thus explaining why a lazy variant of value investing, built almost entirely on buying stocks that trade at low price to book ratio,, will lead you to holding bad businesses, not undervalued ones.     As I noted at the start of this post, it was motivated by trying to clear up a fundamental misunderstanding of what return on equity measures. In fact, the working definition that some commenters used for return on equity was obtained by dividing the net income by the market value of equity. That is not return on equity, but an earnings to price ratio, i.e., the earnings yield, and in these examples, with no growth and perpetual (constant) net income, that earnings yield will be equal to the cost of equity in an efficient market. Extending the Discussion     One of the advantages of this very simple illustration is that it now can be used as a launching pad for casting light on some of the most interesting questions in investing: Good companies versus Good Investments: I have written about the contrast between a good company and a good investment, and this example provides an easy way to illustrate the difference. Looking at companies A and B, there is absolutely no debating the fact that company A is better company, with sustainable moats and high returns on equity (25%), than company B, which struggles to make money (return on equity of 5%), and clearly is in a bad business. However, which of these two companies is the better investment rests entirely on how the market prices them: As you can see, the good company (A) can be a good, bad or neutral investment, depending on whether its is priced at less than, greater than or equal to its fair value ($150 million) and the same can be said about the bad company (B), with the price relative to its fair value ($30 million). At fair value, both become neutral investments, generating returns to shareholders that match their cost of equity. The Weakest Link in Excess Returns: The excess return is computed as the difference between return on equity and the cost of equity, and while it is true that different risk and return models and differences in risk parameters (relative risk measures and equity risk premiums) can cause variations in cost of equity calculations, the return on equity is the weaker link in this comparison. To understand some of the ways the return on equity can be skewed, consider the following variants on the simple example in this case: Accounting inconsistencies: As an entirely accounting number, the return on equity is exposed to accounting inconsistencies and miscategorization. To illustrate with our simple example, assume that half the money invested in business A is in R&D, which accountants expense, instead of capitalizing. That business will report a loss of $15 million (with the R&D expense of $30 million more than wiping out the profit of $15 million) in the first year on book capital of $30 million (the portion of the capital invested that is not R&D), but in the years following, it will report a return on capital of 50.00% (since net income will revert back to $15 million, and equity will stay at $30 million). Carrying this through to the real world, you should not be surprised to see technology and pharmaceutical companies, the two biggest spenders on R&D, report much higher accounting returns than they are actually earning on their investments.. Aging assets: In our example, we looked at firms an instant after the upfront investment was made, when the book value of investment measures what was paid for the assets acquired. As assets age, two tensions appear that can throw off book value, the first being inflation, which if not adjusted for, will result in the book value being understated, and accounting returns overstated. The other is accounting depreciation, which often has little to do with economic depreciation (value lost from aging), and subject to gaming. Extrapolating, projects and companies with older assets will tend to have overstated accounting returns, as inflation and depreciation lay waste to book values. In fact, with an aging company, and adding in stock buybacks, the book value of equity can become negative (and is negative for about 10% of the companies in my company data sample). Fair Value Accounting: For the last few decades, the notion of fair value accounting has been a fever dream for accounting rule writers, and those rules, albeit in patchwork form, have found their way into corporate balance sheets. In my view, fair value accounting is pointless, and I can use my simple example to illustrate why. If you marked the assets of both company A and company B to market, you would end with book values of $150 million and $30 million for the two companies and returns on equity of 10% for both firms. In short, if fair value accounting does what it is supposed to do, every firm in the market will earn a return on equity (capital) equal to the cost of equity (capital), rendering it useless as a metric for separating good and bad businesses. If fair value accounting fails at what it is supposed to do, which is the more likely scenario, you will end up with book values of equity that measure neither original capital invested nor current market value, and returns on equity and capital that become noise. Growth enters the equation: For companies A and B, in this example, we assumed that the net income was constant, i.e., there is no growth. Introducing growth into the equation changes none of the conclusions that we have drawn so far, but it makes reading both the return on equity and the earnings yield much messier. To see why, assume that company A in the example continues to have no growth, but company B expects to see compounded annual growth of 50% a year in its net income of $3 million for the next decade. We can no longer consign company B to the bad business pile as easily, and the current earnings to price ratio for that company will no longer be equal to the cost of equity, even if markets are efficient. Incorporating growth into the analysis will also mean that net income is not equal to cash flow, since some or a large portion of that net income will have to get reinvested back to deliver the growth. In fact, this is the argument that I used in my second data update to explain why comparing the earnings yield to the treasury bond rate is unlikely to yield a complete assessment of whether stocks are under or over valued, since it ignores growth and reinvestment entirely. Exiting bad businesses: This example also helps to bring home why it is so difficult for companies in bad businesses to fix their "badness" or exit their businesses. In the case of company B, for instance, telling the manager to find projects that earn more than 10% is advice that can be freely dished out, but how exactly do you invent good projects in a business that has turned bad? While exiting the business seems to be a better choice, that presupposes that you will get your capital ($60 million) back when you do, but in the real world, potential buyers will discount that value. In fact, if you divest or sell the bad business for less than $30 million, you are actually worse off than staying in the business and continuing to generate $3 million a year in perpetuity, which has a $30 million value. In the real world, most companies in bad businesses hire new CEOs, restructure their businesses and enter new businesses in a desperate attempt to become good businesses, and enrich consultants and bankers, but not their own shareholders, along the way. Conclusion     Many of the comments on my seventh data update, and on my explanation about why  ROE and cost of equity don’t have to be equal in an efficient market, came from people with degrees and certifications in finance, and quite a few of the commenters had “finance professional” listed in their profile. Rather than take issue with them, I would argue that this misunderstanding of basics is a damning indictment of how these concepts and topics are taught in the classroom, and since I may very well be one of the culprits, one reason that I wrote this post is to remind myself that I have to revisit the basics, before making ambitious leaps into corporate financial analysis and valuation. For those of you who are not finance professionals, but rely on them for advice, I hope this is a cautionary note on taking these professionals (consultants, appraisers, bankers) at their word. Some of them throw buzzwords and metrics around, with little understanding of what they mean and how they are related, and it is caveat emptor. YouTube Video

I am in the third week of the corporate finance class that I teach at NYU Stern, and my students have been lulled into a false sense of complacency about what's coming, since I have not used a single metric or number in my class yet. In fact, we have spent almost four sessions (that is 15% of the overall class) talking about the end game in business. In an age when ESG, sustainability and stakeholder wealth maximization have all tried to elbow their way to the front of the line, all laying claim to being what business should be about, I have burnished my "moral troglodyte" standing by sticking with my belief that the end game in business is to maximize value, with earnings and cash flows driving that value, and that businesses that are profitable and value creating are in a much better position to do good, if they choose to try. In this post, I will focus on how companies around the world, and in different sectors, performed on their end game of delivering profits, by first focusing on profitability differences across businesses, then converting profitability into returns, and comparing these returns to the hurdle rates that I talked about in my last data update post. Profitability - Absolute and Relative     While we may all agree with the proverbial bottom line being profits, there seems to be no consensus on how best to measure profitability, either from an accounting or an economic perspective. In this section, I will begin with a simplistic breakdown of the income statement, the financial statement that is supposed to tell us how much a business generated in profits in during a period, and use it as an (imperfect) tool to understand the business economics.      While accountants remain focused on balance sheets, with a fixation of bringing intangibles on to the balance and marking everything up to the market, much of the information that we need to assess the value of a business comes from income and cash flow statements. I am not an accountant, but I do rely on accounting statements for the raw data that I use in corporate finance and valuation. I have tried my hand at financial statement analysis, as practiced by accountants, and discovered that for the most part, the analysis creates more confusions than clarity, as a multiplicity of ratios pull you in different directions. It is for that reason that I created my own version of an accounting class, that you can find on my webpage.     During the course of the class, I assess the income statement, in its most general form, by looking at the multiple measures of earnings at different phases of the statement: Which of these represents the bottom line for businesses? If you are a shareholder in a company, i.e., an equity investor, the measure that best reflects the profits the company made on the equity you invested in them is the earnings per share. That said, there is information in the measures of earnings as you climb the income statement, and there are reasons why as you move up the income statement, the growth rates you  observe may  be different: To get from net income to earnings per share, you bring in share count, and actions taken by companies that alter that share count will have effects. Thus, a company that issues new shares to fund its growth may see net income growth, but its earnings per share growth will lag, as the share count increases. Conversely, a company that buys back shares will see share count drop, and earnings per share growth will outpace net income growth. To get from operating income to net income, you have multiple variables to control for. The first  is taxes, and incorporating its effect will generally lead to lower net income, and the tax rate that you pay to get from pretax profit to net income is the effective tax rate. To the extent that you have cash on your balance, you will generate interest income which adds on to net income, but interest expenses on debt will reduce income, with the net effect being positive for companies with large cash balance, relative to the debt that they owe, and negative for firms with large net debt outstanding. There is also the twist of small (minority) holdings in other companies and the income you generate from those holdings that affect net income. To get from gross income to operating income, you have to bring in operating expenses that are not directly tied to sales. Thus, if you have substantial general and administrative costs or incur large selling and advertising costs or if you spend money on R&D (which accountants mistakenly still treat as operating expenses), your operating income will be lower than your gross income. Finally, to get from revenues to gross income, you net out the expenses incurred on producing the goods/services that you sell, with these expenses often bundled into a "cost of goods sold" categorization. While depreciation of capital investments made is usually separated out from costs of goods sold, and shown as an operating cost, there are some companies, where it is bundled into costs of goods sold. In many cases, the only statement where you will see depreciation and amortization as a line item is the statement of cash flows. With that template in place, the place to start the assessment of corporate profitability is to to look at how much companies generated in each of the different earnings metrics around the world in 2024, broken down by sector: For the financial services sector, note that I have left revenues, gross profit, EBITDA and operating profit as not applicable, because of their unique structure, where debt is raw material and revenue is tough to nail down. (Conventional banks often start their income statements with net interest income, which is interest expense on their debt/deposits netted out against net income, making it closer to nough to categorize and compare to non-financial firms). I have also computed the percentage of firms globally that reported positive profits, a minimalist test on profitability in 2024, and there are interesting findings (albeit some not surprising) in this table: On a net profit basis, there is no contest for the sector that delivers the most net income. It is financials by a wide margin, accounting for a third of the net profits generated by all firms globally in 2024. In fact, technology, which is the sector with the highest market cap in 2024, is third on the list, with industrials taking second place. As you move from down the income statement, the percentage of firms that report negative earnings decreases. Across the globe, close to 84% of firms had positive gross profits, but that drops to 67% with EBITDA, 62% percent with operating income and 61% with net income.  Across sectors, health care has the highest percentage of money-losing companies, on every single metric, followed by materials and communication services, whereas utilities had the highest percentage of money makers. While looking at dollar profits yields intriguing results, comparing them across sectors or regions is difficult to do, because they are in absolute terms, and the scale of businesses vary widely. The simple fix for that is to measure profitability relative to revenues, yielding profit margins - gross margins for gross profits, operating margins with operating profits and net margins with net profits. At the risk of stating these margins, not only are these margins not interchangeable, but they each convey information that is useful in understanding the economics of a business: As you can see, each of the margins provides insight (noisy, but still useful) about different aspects of a business model.     With gross margins, you are getting a measure of unit economics, i.e., the cost of producing the next unit of sale. Thus, for a software company, this cost is low or even zero, but for a manufacturing company, no matter how efficient, the cost will be higher. Even within businesses that look similar, subtle differences in business models can translate into different unit economics. For Netflix, adding a subscriber entails very little in additional cost, but for Spotify, a company that pays for the music based on what customers listen to, by the stream, the additional subscriber will come with additional cost. Just to get a big picture perspective on unit economics, I ranked industries based upon gross margin and arrived at the following list of the ten industries with the highest gross margins and the ten with the lowest: With the caveat that accounting choices can affect these margins, you can see that the rankings do make intuitive sense. The list of industry groups that have the highest margins are disproportionately in technology, though infrastructure firms (oil and gas, green energy, telecom) also make the list since their investment is up front and not per added product sold. The list of industry group with the lowest margins are heavily tilted towards manufacturing and retail, the former because of the costs of making their products and the latter because of their intermediary status.      With operating margins, you are getting a handle on economies of scale. While every companies claims economies of scale as a rationale for why margins should increase as they get larger, the truth is more nuanced. Economies of scale will be a contributor to improving margins only if a company has significant operating expenses (SG&A, Marketing) that grow at a rate lower than revenues. To measure the potential for economies of scale, I looked at the difference between gross and operating margins, across industries, with the rationale that companies with a large difference have a greater potential for economies of scale. Many of the industry groups in the lowest difference (between gross and operating margin) list were also on the low gross margin list, and the implication is not upbeat. When valuing or analyzing these firms, not only should you expect low margins, but those margins will not magically improve, just because a firm becomes bigger.     The EBITDA margin is an intermediate stop, and it serves two purposes. If provides a ranking based upon operating cash flow, rather than operating earnings, and for businesses that have significant depreciation, that difference can be substantial. It is also a rough measure of capital intensity  since to generate large depreciation/amortization, these companies also had to have substantial cap ex. Using the difference between EBITDA and operating margin as a measure of capital intensity, the following table lists the industries with the most and least capital intensity: Profit margins by industry: US, Global, Emerging Markets, Europe, Japan, India and China Again, there are few surprises on this list, including the presence of biotech at the top of the most capital intensive list, but that is due to the significant amortization line items on their balance sheets, perhaps from writing off failed R&D, and real estate on the top of the least capital intensive list, but the real estate segment in question is for real estate operations, not ownership.     The net margin, in many ways, is the least informative of the profit margins, because there are so many wild cards at play, starting with differences in taxes (higher taxes lower net income), financial leverage (more leverage reduces net margins), cash holdings (interest from higher cash balances increases net income) and cross holdings (with varying effects depending on how they are accounted for, and whether they make or lose money). Ranking companies based upon net margin may measure everything from differences in financial leverage (more net debt should lead to lower margins) to extent of cross holdings and non-operating investments (more of these investments can lead to higher margins). Accounting Returns     While scaling profits to revenues to get margins provides valuable information about business models and their efficacy, scaling profits to capital invested in a business is a useful tool for assessing the efficiency of capital allocation at the business., The two measures of profits from the previous section that are scaled to capital are operating income (before and after taxes) and net income, with the former measured against total invested capital (from equity and debt) and the latter against just equity capital. Using a financial balance sheet structure again, here is what we get: The achilles heel for accounting return measures is their almost total dependence on accounting numbers, with operating (net) income coming from income statements and invested capital (equity) from accounting balance sheets. Any systematic mistakes that accountants make (such as not treating leases as debt, which was the default until 2019, and treating R&D as an operating expense, which is still the case) will skew accounting returns. In addition, accounting decisions to write off an asset or take restructuring charges will make the calculation of invested capital more difficult. I wrote a long (and boring) paper on the mechanics of computing accounting returns laying out these and other challenges in computing accounting returns, and you are welcome to browse through it, if you want.            If you are willing to live with the limitations, the accounting returns become proxies for what a business earns on its equity (with return on equity) and as a business (with the cost of capital). Since the essence of creating value is that you need to earn more than your cost of capital, you can synthesize returns with the costs of equity and capital that I talked about in the last post, to get measures of excess returns: I have the data to compute the accounting returns for the 48,000 publicly traded companies in my sample, though there are estimation choices that I had to make, when computing returns on equity and capital: Thus, you will note that I have bypassed accounting rules and capitalized R&D and leases (even in countries where it is not required) to come up with my versions of earnings and invested capital. Having computed the return on capital (equity) for each company, I then compared that return to the cost of capital (equity) to get a measure of excess returns for the company. In the table below, I start by breaking companies down by sector, and looking at the statistics on excess returns, by sector: Note that across all firms, only about 30% of firms earn a return on capital that exceeds the cost of capital. Removing money-losing firms, which have negative returns on capital from the sample, improves the statistic a little, but even across money making firms, roughly half of all firms earn less the the cost of capital.While the proportions of firms that earn returns that exceed the cost of equity (capital) vary across sectors, there is no sector where an overwhelming majority of firms earn excess returns.     I disaggregate the sectors into industry groups and rank them based upon excess returns in the table below, with the subtext being that industries that earn well above their cost of capital are value creators (good businesses) and those that earn below are value destroyers (bad businesses): Excess returns by industry: US, Global, Emerging Markets, Europe, Japan, India and China There are some industry groups on this list that point to the weakness of using last year's earnings to get accounting return on capital. You will note that biotech drug companies post disastrously negative returns on capital but many of these firms are young firms, with some having little or no revenues, and their defense would be that the negative accounting returns reflect where they fall in the life cycle. Commodity companies cycle between the most negative and most returns lists, with earnings varying across the cycle; for these firms, using average return on capital over a longer period should provide more credible results.     Finally, I look at excess returns earned by non-financial service companies by sub-region, again to see if companies in some parts of the world are better positioned to create value than others: As you can see, there is no part of the world that is immune from this problem, and only 29% of all firms globally earn more than their cost of capital. Even if you eliminate firms with negative earnings, the proportion of firms that earn more than their cost of capital is only 46.5%.  Implications     I have been doing versions of this table every year for the last decade, and the results you see in this year's table, i.e., that 70% of global companies generate returns on equity (capital) that are less tan their hurdle rates, has remained roughly static for that period.   Making money is not enough for success: In many businesses, public or private, managers and even owners seem to think that making money (having a positive profit) represents success, not recognizing that the capital invested in these businesses could have been invested elsewhere to earn returns.  Corporate governance is a necessity; Marty Lipton, a renowned corporate lawyer and critic of this things activist argued that activist investing was not necessary because most companies were well managed, and did not need prodding to make the right choices. The data in this post suggests otherwise, with most companies needing reminders from outside investors about the opportunity cost of capital. Companies are not fatted calves: In the last few years, two groups of people have targeted companies - politicians arguing that companies are price-gouging and the virtue crowd (ESG, sustainability and stakeholder wealth maximizers) pushing for companies to spend more on making the world a better place. Implicit in the arguments made by both groups is the assumption that companies are, at least collectively, are immensely profitable and that they can afford to share some of those spoils with other stakeholders (cutting prices for customers with the first group and spending lavishly on advancing social agendas with the second). That may be true for a subset of firms, but for most companies, making money has only become more difficult over the decades, and making enough money to cover the cost of the capital that they raise to create their businesses is an even harder reach. Asking these already stretched companies to spend more money to make the world a better place will only add to the likelihood that they will snap, under the pressures.  A few months ago, I was asked to give testimony to a Canadian legislative committee that was planning to force Canadian banks to lend less to fossil fuel companies and more to green energy firms, a terrible idea that seems to have found traction in some circles. If you isolate the Canadian banks in the sample, they collectively generated returns on equity of 8.1%, with two thirds of banks earning less than their costs of equity. Pressuring these banks to lend less to their best customers (in terms of credit worthiness) and more to their worst customers (green energy company are, for the most part, financial basket cases) is a recipe for pushing these banks into distress, and most of the costs of that distress will be borne not by shareholders, but by bank depositors. YouTube Video Data Updates for 2025 Data Update 1 for 2025: The Draw (and Danger) of Data! Data Update 2 for 2025: The Party continued for US Equities Data Update 3 for 2025: The times they are a'changin'! Data Update 4 for 2025: Interest Rates, Inflation and Central Banks! Data Update 5 for 2025: It's a small world, after all! Data Update 6 for 2025: From Macro to Micro - The Hurdle Rate Question! Data Update 7 for 2025: The End Game in Business! Data Links Excess returns by industry: US, Global, Emerging Markets, Europe, Japan, India and China Profit margins by industry: US, Global, Emerging Markets, Europe, Japan, India and China Paper Links Return on Capital (ROC), Return on Invested Capital (ROIC) and Return on Equity: Measurement and Implications

In the first five posts, I have looked at the macro numbers that drive global markets, from interest rates to risk premiums, but it is not my preferred habitat. I spend most of my time in the far less rarefied air of corporate finance and valuation, where businesses try to decide what projects to invest in, and investors attempt to estimate business value. A key tool in both endeavors is a hurdle rate – a rate of return that you determine as your required return for business and investment decisions. In this post, I will drill down to what it is that determines the hurdle rate for a business, bringing in what business it is in, how much debt it is burdened with and what geographies it operates in. The Hurdle Rate - Intuition and Uses     You don't need to complete a corporate finance or valuation class to encounter hurdle rates in practice, usually taking the form of costs of equity and capital, but taking a finance class both deepens the acquaintance and ruins it. It deepens the acquaintance because you encounter hurdle rates in almost every aspect of finance, and it ruins it, by making these hurdle rates all about equations and models. A few years ago, I wrote a paper for practitioners on the cost of capital, where I described the cost of capital as the Swiss Army knife of finance, because of its many uses.      In my corporate finance class, where I look at the first principles of finance that govern how you run a business, the cost of capital shows up in every aspect of corporate financial analysis: In business investing (capital budgeting and acquisition) decisions, it becomes a hurdle rate for investing, where you use it to decide whether and what to invest in, based on what you can earn on an investment, relative to the hurdle rate. In this role, the cost of capital is an opportunity cost, measuring returns you can earn on investments on equivalent risk. In business financing decisions, the cost of capital becomes an optimizing tool, where businesses look for a mix of debt and equity that reduces the cost of capital, and where matching up the debt (in terms of currency and maturity) to the assets reduces default risk and the cost of capital. In this context, the cost of capital become a measure of the cost of funding a business: In dividend decisions, i.e., the decisions of how much cash to return to owners and in what form (dividends or buybacks), the cost of capital is a divining rod. If the investments that a business is looking at earn less than the cost of capital, it is a trigger for returning more cash, and whether it should be in the form of dividends or buybacks is largely a function of what shareholders in that company prefer: The end game in corporate finance is maximizing value, and in my valuation class, where I look at businesses from the outside (as a potential investor), the cost of capital reappears again as the risk-adjusted discount rate that you use estimate the intrinsic value of a business.  Much of the confusion in applying cost of capital comes from not recognizing that it morphs, depending on where it is being used. An investor looking at a company, looking at valuing the company, may attach one cost of capital to value the company, but within a company, but within a company, it may start as a funding cost, as the company seeks capital to fund its business, but when looking at investment, it becomes an opportunity cost, reflecting the risk of the investment being considered. The Hurdle Rate - Ingredients     If the cost of capital is a driver of so much of what we do in corporate finance and valuation, it stands to reason that we should be clear about the ingredients that go into it. Using one of my favored structures for understanding financial decision making, a financial balance sheet, a cost of capital is composed of the cost of equity and the cost of debt, and I try to capture the essence of what we are trying to estimate with each one in the picture below: To go from abstractions about equity risk and default risk to actual costs, you have to break down the costs of equity and debt into parts, and I try to do so, in the picture below, with the factors that you underlie each piece: As you can see, most of the items in these calculations should be familiar, if you have read my first five data posts, since they are macro variables, having nothing to do with individual companies.   The first is, of course, the riskfree rate, a number that varies across time (as you saw in post on US treasury rates in data update 4) and across currencies (in my post on currencies in data update 5).  The second set of inputs are prices of risk, in both the equity and debt markets, with the former measured by equity risk premiums, and the latter by default spreads. In data update 2, I looked at equity risk premiums in the United States, and expanded that discussion to equity risk premiums in the rest of the world in data update 5). In data update 4, I looked at movements in corporate default spreads during 2024. There are three company-specific numbers that enter the calculation, all of which contribute to costs of capital varying across companies; Relative Equity Risk, i.e., a measure of how risky a company's equity is, relative to the average company's equity. While much of the discussion of this measure gets mired in the capital asset pricing model, and the supposed adequacies and inadequacies of beta, I think that too much is made of it, and that the model is adaptable enough to allow for other measures of relative risk. I am not a purist on this measure, and while I use betas in my computations, I am open to using alternate measures of relative equity risk. Corporate Default Risk, i.e, a measure of how much default risk there is in a company, with higher default risk translating into higher default spreads. For a fairly large subset of firms, a bond rating may stand in as this measure, but even in its absence, you have no choice but to estimate default risk. Adding to the estimation challenge is the fact that as a company borrows more money, it will play out in the default risk (increasing it), with consequences for both the cost of equity and debt (increasing both of those as well). Operating geographies:  The equity risk premium for a company does not come from where it is  incorporated but from where it does business, both in terms of the production of its products and services and where it generates revenue. That said, the status quo in valuation in much of the world seems to be to base the equity risk premium entirely on the country of incorporation, and I vehemently disagree with that practice: Again, I am flexible in how operating risk exposure is measured, basing it entirely on revenues for consumer product and business service companies, entirely on production for natural resource companies and a mix of revenues and production for manufacturing companies. As you can see, the elements that go into a cost of capital are dynamic and subjective, in the sense that there can be differences in how one goes about estimating them, but they cannot be figments of your imagination. The Hurdle Rate - Estimation in 2025     With that long lead in, I will lay out the estimation choices I used to estimate the costs of equity, debt and capital for the close to 48,000 firms in my sample. In making these choices, I operated under the obvious constraint of the raw data that I had on individual companies and the ease with which I could convert that data into cost of capital inputs.  Riskfree rate: To allow for comparisons and consolidation across companies that operate in different currencies, I chose to estimate the costs of capital for all companies in US dollars, with the US ten-year treasury rate on January 1, 2025, as the riskfree rate. Equity Risk Premium: Much as I would have liked to compute the equity risk premium for every company, based upon its geographic operating exposure, the raw data did not lend itself easily to the computation. Consequently, I have used the equity risk premium of the country in which a company is headquartered to compute the equity risk premium for it. Relative Equity Risk: I stay with beta, notwithstanding the criticism of its effectiveness for two reasons. First, I use industry average betas, adjusted for leverage, rather than the company regression beta, because because the averages (I title them bottom up betas) are significantly better at explaining differences in returns across stocks. Second, and given my choice of industry average betas, none of the other relative risk measures come close, in terms of predictive ability. For individual companies, I do use the beta of their primary business as the beta of the company, because the raw data that I have does not allow for a breakdown into businesses.  Corporate default risk: For the subset of the sample of companies with bond ratings, I use the S&P bond rating for the company to estimate the cost of debt. For the remaining companies, I use interest coverage ratios as a first measure to estimate synthetic ratings, and standard deviation in stock prices as back-up measure. Debt mix: I used the market capitalization to measure the market value of equity, and stayed with total debt (including lease debt) to estimate debt to capital and debt to equity ratios The picture below summarizes my choices: There are clearly approximations that I used in computing these global costs of capital that I would not use if I were computing a cost of capital for valuing an individual company, but this approach yields values that can yield valuable insights, especially when aggregated and averaged across groups. a. Sectors and Industries     The risks of operating a business will vary  widely across different sectors, and I will start by looking at the resulting differences in cost of capital, across sectors, for global companies: There are few surprises here, with technology companies facing the highest costs of capital and financials the lowest, with the former pushed up by high operating risk and a resulting reliance on equity for capital, and the latter holding on because of regulatory protection.     Broken down into industries, and ranking industries from highest to lowest costs of capital, here is the list that emerges: Download industry costs of capital The numbers in these tables may be what you would expect to see, but there are a couple of powerful lessons in there that businesses ignore at their own peril. The first is that even a casual perusal of differences in costs of capital across industries indicates that they are highest in businesses with high growth potential and lowest in mature or declining businesses, bringing home again the linkage between danger and opportunity. The second is that multi-business companies should understand that the cost of capital will vary across businesses, and using one corporate cost of capital for all of them is a recipe for cross subsidization and value destruction. b. Small versus Larger firms     In my third data update for this year, I took a brief look at the small cap premium, i.e, the premium that small cap stocks have historically earned over large cap stocks of equivalent risk, and commented on its disappearance over the last four decades. I heard from a few small cap investors, who argued that small cap stocks are riskier than large cap stocks, and should earn higher returns to compensate for that risk. Perhaps, but that has no bearing on whether there is a small cap premium, since the premium is a return earned over and above what you would expect to earn given risk, but I remained curious as to whether the conventional wisdom that small cap companies face higher hurdle rates is true. To answer this question, I examine the relationship between risk and market cap, breaking companies down into market cap deciles at the start of 2025, and estimating the cost of capital for companies within each decile: The results are mixed. Looking at the median costs of capital, there is no detectable pattern in the cost of capital, and the companies in the bottom decile have a lower median cost of capital (8.88%) than the median company in the sample (9.06%). That said, the safest companies in  largest market cap decile have lower costs of capital than the safest companies in the smaller market capitalizations. As a generalization, if small companies are at a disadvantage when they compete against larger companies, that disadvantage is more likely to manifest in difficulties growing and a higher operating cost structure, not in a higher hurdle rate. c. Global Distribution     In the final part of this analysis, I looked at the costs of capital of all publicly traded firms and played some Moneyball, looking at the distribution of costs of capital across all firms. In the graph below,I present the histogram of cost of capital, in US dollar terms, of all global companies at the start of 2025, with a breakdown of costs of capital, by region, below: I find this table to be one of the most useful pieces of data that I possess and I use it in almost every aspect of corporate finance and valuation: Cost of capital calculation: The full cost of capital calculation is not complex, but it does require inputs about operating risk, leverage and default risk that can be hard to estimate or assess for young companies or companies with little history (operating and market). For those companies, I often use the distribution to estimate the cost of capital to use in valuing the company. Thus, when I valued Uber in June 2014, I used the cost of capital (12%) at the 90th percentile of US companies, in 2014, as Uber's cost of capital. Not only did that remove a time consuming task from my to-do list, but it also allowed me to focus on the much more important questions of  revenue growth and margins for a young company. Drawing on my fifth data update, where I talk about differences across currencies, this table can be easily modified into the currency of your choice, by adding differential inflation. Thus, if you are valuing an Indian IPO, in rupees, and you believe it is risky, at the start of 2025, adding an extra 2% (for the inflation differential between rupees and dollars in 2025) to the ninth decile of Indian costs of capital (12.08% in US dollars) will give you a 14.08% Indian rupee cost of capital. Fantasy hurdle rates: In my experience, many  investors and companies make up hurdle rates, the former to value companies and the latter to use in investment analysis. These hurdle rates are either hopeful thinking on the part of investors who want to make that return or reflect inertia, where they were set in stone decades ago and have never been revisited. In the context of checking to see whether a valuation passes the 3P test (Is it possible? Is it plausible? Is it probable?), I do check the cost of capital used in the valuation. A valuation in January 2025, in US dollars, that uses a 15% cost of capital for a publicly traded company that is mature is fantasy (since it is in well in excess of the 90th percentile), and the rest of the valuation becomes moot.  Time-varying hurdle rates: When valuing companies, I believe in maintaining consistency, and one of the places I would expect it to show up is in hurdle rates that change over time, as the company's story changes. Thus, if you are valuing a money-losing and high growth company, you would expect its cost of capital to be high, at the start of the valuation, but as you build in expectations of lower growth and profitability in future years, I would expect the hurdle rate to decrease (from close to the ninth decile in the table above towards the median). It is worth emphasizing that since my riskfree rate is always the current rate, and my equity risk premiums are implied, i.e., they are backed out from how stocks are priced, my estimates of costs of capital represent market prices for risk, not theoretical models. Thus, if looking at the table, you decide that a number (median for your region, 90th percentile in US) look too low or too high, your issues are with the market, not with me (or my assumptions). Takeaways     I am sorry that this post has gone on as long as it has, but to end, there are four takeaways from looking at the data: Corporate hurdle rate: The notion that there is a corporate hurdle rate that can be used to assess investments across the company is a myth, and one with dangerous consequences. It plays out in all divisions in a multi-business company using the same (corporate) cost of capital and in acquisitions, where the acquiring firm's cost of capital is used to value the target firm. The consequences are predictable and damaging, since with this practice, safe businesses will subsidize risky businesses, and over time, making the company riskier and worse off over time. Reality check on hurdle rates: All too often, I have heard CFOs of companies, when confronted with a cost of capital calculated using market risk parameters and the company's risk profile, say that it looks too low, especially in the decade of low interest rates, or sometimes, too high, especially if they operate in an risky, high-interest rate environment. As I noted in the last section, making up hurdle rates (higher or lower than the market-conscious number) is almost never a good idea, since it violates the principle that you have live and operate in the world/market you are in, not the one you wished you were in. Hurdle rates are dynamic: In both corporate and investment settings, there is this almost desperate desire for stability in hurdle rates. I understand the pull of stability, since it is easier to run a business when hurdle rates are not volatile, but again, the market acts as a reality check. In a world of volatile interest rates and risk premia, using a cost of capital that is a constant is a sign of denial. Hurdle rates are not where business/valuation battles are won or lost: It is true that costs of capital are the D in a DCF, but they are not and should never be what makes or breaks a valuation. In my four decades of valuation, I have been badly mistaken many times, and the culprit almost always has been an error on forecasting growth, profitability or reinvestment (all of which lead into the cash flows), not the discount rate. In the same vein, I cannot think of a single great company that got to greatness because of its skill in finessing its cost of capital, and I know of plenty that are worth trillions of dollars, in spite of never having actively thought about how to optimize their costs of capital. It follows that if  you are spending the bulk of your time in a capital budgeting or a valuation, estimating discount rates and debating risk premiums or betas, you have lost the script. If you are valuing a mature US company at the start of 2025, and you are in a hurry (and who isn't?), you would be well served using a cost of capital of 8.35% (the median for US companies at the start of 2025) and spending your time assessing its growth and profit prospects, and coming back to tweak the cost of capital at the end, if you have the time. YouTube Video Data Updates for 2025 Data Update 1 for 2025: The Draw (and Danger) of Data! Data Update 2 for 2025: The Party continued for US Equities Data Update 3 for 2025: The times they are a'changin'! Data Update 4 for 2025: Interest Rates, Inflation and Central Banks! Data Update 5 for 2025: It's a small world, after all! Data Update 6 for 2025: From Macro to Micro - The Hurdle Rate Question! Data Update 7 for 2025: The End Game in Business! Data Links Cost of capital, by industry grouping: US, Global, Emerging Markets, Japan, Europe, India, China) Cost of capital distribution, by industry Paper links The Cost of Capital: The Swiss Army Knife of Finance