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BI & Analytics » Profitability and Return » Return pecking order

Return Pecking Order

How do cost of or return on different sources of funding stack up? Is there such a thing called return pecking order which recognises and defers to the risk hierarchy, i.e. Common Equity, Preferred Stock and Debt.

Below is graphical visualization showing comparison of returns on various constituents of a business's funding structure, e.g. Return on Common Equity and minority shareholders, Return on Total Funds, Return on Total Assets, Cost of preferred capital and Cost of Borrowed Funds or Debt.

The ratios, analyses pertaining to various measures of business returns represented in the below chart are based on information drawn from financials (e.g. financial statements comprising balance sheet, income statement or profit & loss account) of listed companies across the globe.