Hamada Equation

The Hamada equation is a type of fundamental analysis...a research method investors use to try to measure the value of a security by digging into a company’s data.

Specifically, the Hamada equation separates a firm’s financial risk from its business risk, building off of pre-existing theories. It analyzes a firm’s cost of capital as it borrows, seeing how taking on more debt affects its riskiness. Many businesses and investors have found it useful for risk management, portfolio management, and capital restructuring.

Thanks, Mr. Robert Hamada...not hamada we start crunching these numbers?