The template uses debt and equity as the sources of finance in calculating a business valuation. Equity makes up the remaining part of the funds which are required to purchase the business which is being valued and the debt finance plus the equity finance will always equal 100%. The ratio between debt and equity is important as the cost of debt is usually lower than the cost of equity and the debt equity percentage therefore has an effect on business valuations as it affects the weighted average cost of capital which is used as the discount rate.

CopyFinancial > The template uses debt and equity as the sources of finance in calculating a business valuation. Equity makes up the remaining part of the funds which are required to purchase the business which is being valued and the debt finance plus the equity finance will always equal 100%. The ratio between debt and equity is important as the cost of debt is usually lower than the cost of equity and the debt equity percentage therefore has an effect on business valuations as it affects the weighted average cost of capital which is used as the discount rate.