ACCOUNTANCY EQUATIONS
BASIC
assets = liabilities + equity
equity = liabilities - assets
revenue - expenses = profit
MARGIN ANALYSIS
Gross profit margin = gross profit / revenue
Operating profit margin = operating profit / revenue
Net income margin = net income / revenue
ROA/ROE
Return on assets = net income / average total assets
Return on equity = net income / average total equity
>> average total assets/equity = (last year’s assets/equity + this year’s assets/equity) / 2 <<
TURNOVER RATIO
revenue / total assets
EPS
Earnings per share = net income attributable to common stock / average common shares outstanding
Price-to-earnings = share price / earnings per share
LIQUIDITY
Net working capital = current assets - current liabilities
Current ratio = current assets / current liabilities
Quick / acid test ratio
= (current assets - inventory) / current liabilities
= (cash + marketable securities + receivables) / current liabilities
= (cash + cash equivalents) / current liabilities.
SOLVENCY
Income statement analysis
, Interest cover ratio = (net income + interest expense + tax expense) / interest expense
Balance sheet analysis
Leverage ratio = assets / equity
Longterm debt to equity ratio = longterm debt / equity
Debt service analysis ratios
EBITDA = EBIT + depreciation
EBITDA cover ratio = EBITDA / interest expense
Interest cover ratio
= EBIT / interest expense
EBIT = net income + tax exp + interest exp
STANDARD DEVIATION
Step 1: Find the mean.
Step 2: For each data point, find the
square of its distance to the mean.
Step 3: Sum the values from Step 2.
Step 4: Divide by the number of data
points.
Step 5: Take the square root
STANDARD ERROR
PRESENT VALUE - MONEY
Present value = future value / (1 + r)n
- Future value of the cash flow (PV)
- Interest rate (r) or the discount rate
- Time period (n)
Annuity
𝐶𝐹1
𝐶𝐹 2
𝐶𝐹 𝑇
𝑃𝑉 = ( (1 + 𝑅) )+( 2 ) + ... + ( 𝑇 )
(1 + 𝑅) (1 + 𝑅)
BASIC
assets = liabilities + equity
equity = liabilities - assets
revenue - expenses = profit
MARGIN ANALYSIS
Gross profit margin = gross profit / revenue
Operating profit margin = operating profit / revenue
Net income margin = net income / revenue
ROA/ROE
Return on assets = net income / average total assets
Return on equity = net income / average total equity
>> average total assets/equity = (last year’s assets/equity + this year’s assets/equity) / 2 <<
TURNOVER RATIO
revenue / total assets
EPS
Earnings per share = net income attributable to common stock / average common shares outstanding
Price-to-earnings = share price / earnings per share
LIQUIDITY
Net working capital = current assets - current liabilities
Current ratio = current assets / current liabilities
Quick / acid test ratio
= (current assets - inventory) / current liabilities
= (cash + marketable securities + receivables) / current liabilities
= (cash + cash equivalents) / current liabilities.
SOLVENCY
Income statement analysis
, Interest cover ratio = (net income + interest expense + tax expense) / interest expense
Balance sheet analysis
Leverage ratio = assets / equity
Longterm debt to equity ratio = longterm debt / equity
Debt service analysis ratios
EBITDA = EBIT + depreciation
EBITDA cover ratio = EBITDA / interest expense
Interest cover ratio
= EBIT / interest expense
EBIT = net income + tax exp + interest exp
STANDARD DEVIATION
Step 1: Find the mean.
Step 2: For each data point, find the
square of its distance to the mean.
Step 3: Sum the values from Step 2.
Step 4: Divide by the number of data
points.
Step 5: Take the square root
STANDARD ERROR
PRESENT VALUE - MONEY
Present value = future value / (1 + r)n
- Future value of the cash flow (PV)
- Interest rate (r) or the discount rate
- Time period (n)
Annuity
𝐶𝐹1
𝐶𝐹 2
𝐶𝐹 𝑇
𝑃𝑉 = ( (1 + 𝑅) )+( 2 ) + ... + ( 𝑇 )
(1 + 𝑅) (1 + 𝑅)
