Formulas

Question 1

What is NPV?

Answer 1

Calculates the current total value of a future stream of payments.

Question 2

What is the NPV formula?

Answer 2

NPV = CF/(r-g)

Question 3

What is the rule of 72?

Answer 3

Simple way to determine how long an investment will take to double given a fixed annual rate of interest

Divide 72 by the annual rate of return to obtain a rough estimate of how many years it will take for the initial investment to duplicate itself

Question 4

What is the ROI formula?

Answer 4

ROI= (Gain-cost)/cost

Question 5

What is the percent change formula?

Answer 5

% 𝑐ℎ𝑎𝑛𝑔𝑒 = (𝑒𝑛𝑑𝑖𝑛𝑔 𝑣𝑎𝑙𝑢𝑒/𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝑣𝑎𝑙𝑢𝑒)− 1

Question 6

What is the break even formula?

Answer 6

𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡 = 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 ∗ 𝑃𝑟𝑖𝑐𝑒 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡

P – VC is the contribution margin

Question 7

What is the difference between profit margin and contribution margin?

Answer 7

Gross profit margin measures the amount of revenue that remains after subtracting costs directly associated with production. Contribution margin is a measure of the profitability of various individual products.

Question 8

What is the profit margin formula?

Answer 8

Profit Margin = (R - C) / R

Question 9

What is the formula for operating margin?

Answer 9

𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑀𝑎𝑟𝑔𝑖𝑛 = 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡/𝑅𝑒𝑣𝑒𝑛𝑢e

Question 10

What is the formula for gross margin?

Answer 10

𝐺𝑟𝑜𝑠𝑠 𝑀𝑎𝑟𝑔𝑖𝑛 = (𝑅𝑒𝑣𝑒𝑛𝑢𝑒 −𝐶𝑂𝐺𝑆)/𝑅𝑒𝑣𝑒𝑛𝑢𝑒 = 𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡/𝑅𝑒𝑣𝑒𝑛𝑢𝑒

Question 11

What is the structure of an income statement?

Answer 11

Sales – COGS
= Gross Profit
- SG&A
= EBITDA
- Depreciation/Amortization
= Operating Profit
- Interest Expense
= EBIT
- Tax Expense
= Net Income