Capital cost refers to the interest and other fees paid by a company for financing, and is usually used as an important indicator to measure corporate financing costs and corporate risks. The following will introduce the meaning and function of capital costs from three aspects.

First of all, capital costs directly affect corporate financing costs and operating decisions. The higher a company's financing costs, the more its profitability and growth potential are undermined. Companies with high financing costs may tend to use short-term financing methods, which will increase the company's risks and make the company more vulnerable to market fluctuations. Therefore, by calculating the cost of capital, companies can better understand their financial situation, make reasonable business decisions, and reduce corporate financing costs and risks.

Secondly, the cost of capital also reflects the company's credit risk and market changes. The cost of capital is affected by many factors such as market supply and demand, monetary policy, inflation levels, corporate financial conditions and credit ratings. As markets continue to change, so will the cost of capital. Enterprises can respond and adjust in advance to reasonably reduce financing costs and risks by understanding market trends and their own financial conditions.

Finally, calculating the cost of capital helps companies evaluate the feasibility and rate of return of their investment projects. Capital cost is an important cost factor for corporate investment projects, and the feasibility and rate of return of investment projects are also directly affected by capital costs. Enterprises can make investment decisions by calculating capital costs and comprehensively considering the risks, costs and expected returns of investment projects, improving capital utilization efficiency and the economic benefits of enterprises.

In short, capital cost is an important indicator of enterprise financing costs and operating decisions, and plays an important role in the operation, management and development of enterprises. Enterprises need to pay close attention to the changing trends of capital costs and adopt reasonable strategies to reduce financing costs and risks and improve their financial status and competitiveness.