general terms Flashcards
for every term know: formula, purpose, synonyms
revenue
meaning: how much a firm earns before subtracting costs
synonyms: top-line, sales
formula: P x Q
net income or profit
meaning: how much a firm earns after subtracting costs
synonyms: bottom-line, EBITDA, operating profit (+ depreciation)
types of costs involved: R&D, SG&A
formula: revenue - COGS - op costs
straight-line growth
meaning: assume a growth multiple for a present value that does not change
e.g. a machine producing chocolates
formula: mx + c
compound growth
meaning: assume a growth multiple for a present value that scales based on that same growth multiple
e.g. ducks breeding
synonym: geometric series
sum of all the terms in compound growth
formula: sum of geometric series
a = PV
r = interest
n = number of time periods
working capital
meaning: cash in non-cash forms used to drive business operations
components: A/R, inventory, taxes payable, accrued costs
discount rate for FV
meaning: discounting money ($ value) in the future to aptly match today’s value
e.g. the inverse of money (collectibles) release a special edition now, you get it now, it is worth much more in future
cash flow
meaning: how much literal moolah the firm has
healthy cash flow
meaning: ensure ability to meet short-term financial obligations (working capital); conduct growth expansion; a higher chance of securing lower interest rates for future loans with a strong cash at bank position
“_____” margin
the term that comes right before margin always refers to the numerator
e.g. gross margin = gross profit / revenue
e.g.1. net profit margin = profit / revenue
e.g.2. operating margin = operating profit / revenue
Return on investment (ROI)
formula: additional profit / initial capital invested
e.g. 互相帮助是希望得到比例的利益
Payback or Breakeven
meaning: how many years a full repayment of an investment would take, usually in no. of years or months. It is a metric used to choose whether to invest, amongst investments
formula: initial capital invested / profit
e.g. might ask you to ignore fixed costs
Net Present Value (NPV)
formula: remember to minus initial costs
purpose: to calculate how “worth-it” making an investment is
