Key formulas

Question 1

NPV (perpetuity)

Answer 1

value of asset / discount rate

Question 2

NPV (general)

Answer 2

Annual cash flow / (1+r)^t

Question 3

Rule of 72

Answer 3

Time for invested principle to double = 72/r (r is rate of return)

Question 4

Little’s Law

Answer 4

Inventory = Throughput x Flow Time

Question 5

Inventory Turns

Answer 5

COGS / Average Inventory

Question 6

Days of Inventory

Answer 6

Inventory Turns * 365

Question 7

Profitability

Answer 7

Q*(P-VC)-FC

Question 8

Breakeven

Answer 8

Investment price - cost

Question 9

Gross margin

Answer 9

(revenue - cost) / revenue

Question 10

Net margin

Answer 10

net income / sales revenue

Question 11

Markup

Answer 11

(price - cost) / cost

Question 12

Return on Assets (ROA)

Answer 12

Net income / Total Assets

Question 13

Return on Equity (ROE)

Answer 13

Net income / Total Shareholders’ Equity

Question 14

DuPont Analysis

Answer 14

ROE = Operating efficiency * Asset utilization * Leverage

ROE = (net income / sales) * (sales / assets) * (assets / equity)

Question 15

Working capital

Answer 15

Assets - liability

Question 16

Return on Investment (ROI)

Answer 16

profit / capital invested (e.g., assets, working capital)

Question 17

Income Statement

Answer 17

Sales - COGS
= Gross profit
- SG&A
= EBITDA
- Depreciation/amortization
= Operating profit
- Interest expense
=EBIT
- Tax expense
= Net income

Question 18

1/6

Answer 18

.165

Question 19

1/7

Answer 19

.14

Question 20

1/8

Answer 20

.125

Question 21

1/9

Answer 21

.11