Capital Charge
Financial Dictionary — Finance & Capital Markets
Definition
is a monetary amount, calculated by multiplying the money the business has tied up in capital, by the weighted average cost of capital (WACC). Capital charge is deducted from net operating profit after tax to arrive at Economic Profit.
Use cases, Example & Why it matters
Use cases
- Used in capital markets for disclosure, valuation, and investor communication.
- Used when interpreting securities, filings, and market indicators.
- Used when interpreting securities, filings, and market indicators.
Example
- Example: Investors reference **Capital Charge** when assessing risk/return and interpreting public disclosures.
Why it matters
- Why it matters: Improves transparency for investors and supports pricing, funding, and governance decisions.