Formulas to Assess Financials

 

A)	How profitable is a company for every $1 in stuff they Sell?
1	How profitable is a company for every dollar they sell of inventory before expense?
	Cost of Good Sold		=	Gross Margin.
	Revenue
2	How profitable is a company for every dollar they sell of inventory after MOST expense?
	EBITDA	=	Operating Margin
	Revenue
3	How profitable is a company for every dollar they sell of inventory after ALL expense?
	Net Income	=	Net Profit Margin
	Revenue
4	How profitable is a company for every dollar they have of assets?
	Net Income	=	Return on Assets
	Assets
5	How profitable is a company for every dollar they have of equity?
	Net Income	=	Return on Equity
	Equity
B)	How do we know if a company has way too much debt
1	Does the company have more debt than assets?
	Total Liabilities	=	Debt to Assets
	Total Assets
	** Point to be noted it should be not more than 1
	Bank will not give you loan because they know you already have more debt on you.
2	Does the company have more debt than equity?
	Total Liabilities	=	Debt to Equity
	Total Equity
3	Can a company pay the interest on its debt
	EBITDA	=	Interest coverage ratio
	Interest
C)	How long does it take a company to turn stuff they sell into $ ?
1	How many days of inventory does a company have on hands?
	(Inventory / Cost of Good Sold) * 365  =   Inventory Days on Hand (DOH)
D)	How is the company doing/ valued versus the competition?
1	Price		Same as Market Cap / Net Income
	Earnings		Market Cap = Shares X Stock Price
2	P/E		PEG ratio
	Growth		Growth is EPS % growth
3	Price		Price= Market Cap
	Revenue
4	EV		EV= Market Cap + Debt - Cash & S.T. Investments.
	EBITDA
5	EV		Of course we know that sales is same as revenue
	Sales
6	Price
	Free Cash Flow
7	Price		Book= Book value, Which is Assets- Liabilities
	Book