Profitability Metrics
|
Formula
Name |
Formula |
Example |
|
Gross
Profit |
Sales –
Cost of Goods Sold (COGS) |
Example:
Sales = $100,000, COGS = $60,000 → Gross Profit = $40,000 |
|
Gross Profit Margin |
(Gross Profit ÷ Sales) × 100 |
Example: Gross Profit = $40,000, Sales = $100,000 → GPM = 40% |
|
Operating
Profit |
Gross
Profit – Operating Expenses |
Example:
Gross Profit = $40,000, Expenses = $15,000 → Operating Profit = $25,000 |
|
Net Profit |
Operating Profit – Interest – Taxes |
Example: Operating Profit = $25,000, Interest + Taxes = $5,000 →
Net Profit = $20,000 |
Return & Performance Ratios
|
Formula
Name |
Formula |
Example |
|
Return
on Investment (ROI) |
(Gain from
Investment ÷ Cost of Investment) × 100 |
Example:
Gain = $50,000, Cost = $40,000 → ROI = 125% |
|
Return on Equity (ROE) |
(Net Profit ÷ Shareholder’s Equity) × 100 |
Example: Net Profit = $20,000, Equity = $100,000 → ROE = 20% |
|
Return
on Assets (ROA) |
Net Profit
÷ Total Assets |
Example:
Net Profit = $20,000, Assets = $200,000 → ROA = 10% |
Efficiency Ratios
|
Formula
Name |
Formula |
Example |
|
Inventory
Turnover |
COGS ÷
Average Inventory |
Example:
COGS = $60,000, Avg. Inventory = $15,000 → Turnover = 4 times |
|
Days Sales Outstanding (DSO) |
(Accounts Receivable ÷ Credit Sales) × Days |
Example: AR = $30,000, Credit Sales = $90,000, Days = 365 → DSO =
122 days |
Liquidity Ratios
|
Formula
Name |
Formula |
Example |
|
Current
Ratio |
Current
Assets ÷ Current Liabilities |
Example:
Current Assets = $50,000, Liabilities = $25,000 → Current Ratio = 2.0 |
|
Quick Ratio |
(Current Assets – Inventory) ÷ Current Liabilities |
Example: Assets = $50,000, Inventory = $10,000, Liabilities =
$25,000 → Quick Ratio = 1.6 |
Leverage Ratios
|
Formula
Name |
Formula |
Example |
|
Debt-to-Equity
Ratio |
Total Debt
÷ Shareholder’s Equity |
Example:
Debt = $60,000, Equity = $100,000 → D/E Ratio = 0.6 |
|
Financial Leverage |
EBIT ÷ EBT |
Example: EBIT = $25,000, EBT = $20,000 → Leverage = 1.25 |
Market Ratios
|
Formula
Name |
Formula |
Example |
|
Earnings
Per Share (EPS) |
Net Profit
÷ Number of Shares |
Example:
Net Profit = $20,000, Shares = 10,000 → EPS = $2 per share |
|
Price-to-Earnings (P/E) Ratio |
Stock Price ÷ EPS |
Example: Stock Price = $40, EPS = $2 → P/E = 20 |
Cost & Break-Even Analysis
|
Formula
Name |
Formula |
Example |
|
Break-Even
Point (BEP) |
Fixed Costs
÷ (Selling Price – Variable Cost) |
Example:
Fixed Costs = $50,000, Price = $50, Variable Cost = $30 → BEP = 2,500 units |
|
Margin of Safety |
(Sales – BEP) ÷ Sales |
Example: Sales = $100,000, BEP = $80,000 → MOS = 20% |
Capital Budgeting Metrics
|
Formula
Name |
Formula |
Example |
|
Net
Present Value (NPV) |
PV of
Future Cash Flows – Initial Investment |
Example: PV
= $120,000, Investment = $100,000 → NPV = $20,000 |
|
Internal Rate of Return (IRR) |
Discount rate at which NPV = 0 |
Example: A project with 15% IRR → Accept if cost of capital <
15% |
|
Payback
Period |
Initial
Investment ÷ Annual Cash Inflows |
Example:
Investment = $100,000, Cash Inflow = $25,000 → Payback = 4 years |
Capital Structure & Cost of Capital
|
Formula
Name |
Formula |
Example |
|
Weighted
Average Cost of Capital (WACC) |
(Cost of Debt
× %Debt × (1 – Tax Rate)) + (Cost of Equity × %Equity) |
Example:
Cost of Debt = 6%, Cost of Equity = 12%, Structure = 40:60 → WACC ≈ 9.6% |
Cash Flow Metrics
|
Formula
Name |
Formula |
Example |
|
Free
Cash Flow (FCF) |
Operating
Cash Flow – Capital Expenditures |
Example:
OCF = $50,000, CapEx = $20,000 → FCF = $30,000 |
|
Cash Flow Margin |
(Operating Cash Flow ÷ Sales) × 100 |
Example: OCF = $30,000, Sales = $100,000 → CFM = 30% |
