1.
Financial Statement Analysis
Income Statement
Gross Profit = Revenue - Cost of Goods Sold (COGS)
Gross Profit Margin = (Gross Profit / Revenue) × 100
Operating Profit (EBIT) = Revenue - Operating Expenses
Operating Profit Margin = (Operating Profit / Revenue) × 100
Net Profit (Net Income) = Revenue - Total Expenses
Net Profit Margin = (Net Profit / Revenue) × 100
Earnings Per Share (EPS) = Net Income / Weighted Average Shares Outstanding
EBITDA = EBIT + Depreciation + Amortization
EBITDA Margin = (EBITDA / Revenue) × 100
Balance Sheet
Current Ratio = Current Assets / Current Liabilities
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Debt-to-Equity Ratio = Total Debt / Total Equity
Equity Multiplier = Total Assets / Total Equity
Working Capital = Current Assets - Current Liabilities
Net Working Capital (NWC) Ratio = (Current Assets - Current Liabilities) / Total
Assets
Return on Assets (ROA) = (Net Income / Total Assets) × 100
Return on Equity (ROE) = (Net Income / Shareholder’s Equity) × 100
Return on Invested Capital (ROIC) = (EBIT × (1 - Tax Rate)) / (Debt + Equity)
Cash Flow Analysis
Free Cash Flow (FCF) = Operating Cash Flow - Capital Expenditures (CapEx)
Free Cash Flow to Equity (FCFE) = FCF + Net Borrowings - Debt Repayments
Cash Conversion Cycle (CCC) = Days Inventory Outstanding + Days Sales
Outstanding - Days Payable Outstanding
Operating Cash Flow Ratio = Operating Cash Flow / Current Liabilities
2. Valuation Metrics
Discounted Cash Flow (DCF) Valuation
Present Value (PV) = Future Cash Flow / (1 + Discount Rate)ⁿ
Net Present Value (NPV) = Σ [CFt / (1 + r)ᵗ] - Initial Investment
Internal Rate of Return (IRR) = Discount rate where NPV = 0
Payback Period = Initial Investment / Annual Cash Inflows
Profitability Index (PI) = PV of Future Cash Flows / Initial Investment
Multiples-Based Valuation
Enterprise Value (EV) = Market Cap + Total Debt - Cash & Equivalents
EV/EBITDA = Enterprise Value / EBITDA
EV/Sales = Enterprise Value / Revenue
P/E Ratio = Market Price per Share / Earnings per Share (EPS)
Price-to-Book Ratio (P/B) = Market Price per Share / Book Value per Share
3. Capital Budgeting & Investment Analysis
Weighted Average Cost of Capital (WACC) = (E/V × Re) + (D/V × Rd × (1 - Tax
Rate))
o Where:
E = Market Value of Equity
D = Market Value of Debt
V = Total Value (E + D)
Re = Cost of Equity
Rd = Cost of Debt
Capital Asset Pricing Model (CAPM) = Risk-Free Rate + Beta × (Market Return -
Risk-Free Rate)
Cost of Equity (Re) = (D1 / P0) + g
o Where:
D1 = Expected Dividend
P0 = Current Stock Price
g = Growth Rate
Cost of Debt (Rd) = Interest Expense / Total Debt
Leverage Ratio = Total Debt / Total Capital
4. Financial Forecasting & Sensitivity Analysis
Revenue Growth Rate = (Current Year Revenue - Previous Year Revenue) / Previous
Year Revenue
Compounded Annual Growth Rate (CAGR) = [(Final Value / Initial Value)^(1/n)] - 1
Break-Even Point (Units) = Fixed Costs / (Selling Price per Unit - Variable Cost per
Unit)
Break-Even Revenue = Fixed Costs / Contribution Margin Ratio
Operating Leverage = % Change in EBIT / % Change in Sales
Financial Leverage = % Change in EPS / % Change in EBIT
5. Mergers & Acquisitions (M&A) Analysis
Accretion / Dilution = Target EPS - Acquirer EPS (if positive = accretive, negative =
dilutive)
Synergy Value = Expected Combined Value - (Acquirer Value + Target Value)
Enterprise Value to Revenue = EV / Revenue
6. Risk Analysis & Scenario Planning
Value at Risk (VaR) = Portfolio Value × Z-Score × Standard Deviation
Expected Return (Portfolio) = Σ (Weight of Asset × Expected Return of Asset)
Standard Deviation (Portfolio Risk) = √Σ [Wi² × σi² + ΣΣ (Wi × Wj × Covij)]
