Chapter 21 · Master formula sheet
Formula sheet — general
Profitability, growth, valuation, liquidity, debt, efficiency, cash flow and dividend formulas, with interpretation.
26 of 30 · 9 min
Profitability
| Metric | Formula | Higher usually | Exception |
|---|---|---|---|
| Gross margin | Gross profit ÷ Revenue × 100 | Better | Meaningless for banks |
| Operating margin | EBIT ÷ Revenue × 100 | Better | Rises with scale |
| Net margin | Net profit ÷ Revenue × 100 | Better | Distorted by one-offs |
| ROE | Net income ÷ Avg equity × 100 | Better | Can be leverage, not skill |
| ROA | Net income ÷ Avg assets × 100 | Better | Not comparable across sectors |
| ROIC | NOPAT ÷ Invested capital × 100 | Better | Invested capital is defined several ways |
Growth
| Metric | Formula | Higher usually | Exception |
|---|---|---|---|
| Growth rate | (Current − Previous) ÷ Previous × 100 | Better | Base year can be chosen |
| CAGR | (End ÷ Begin)^(1/n) − 1 | Better | Hides volatility |
Valuation
| Metric | Formula | Lower usually | Exception |
|---|---|---|---|
| P/E | Price ÷ EPS | Cheaper | Low P/E often signals falling earnings |
| P/B | Price ÷ BVPS | Cheaper | Weak for asset-light firms |
| P/S | Market cap ÷ Revenue | Cheaper | Ignores profitability |
| EV | Mkt cap + Debt − Cash | — | — |
| EV/EBITDA | EV ÷ EBITDA | Cheaper | Flatters capital-heavy firms |
| PEG | P/E ÷ Growth % | Cheaper | Growth input is an estimate |
| Dividend yield | DPS ÷ Price × 100 | Higher = more income | May signal a falling price |
| Earnings yield | EPS ÷ Price × 100 | Higher | Same limits as P/E |
Debt, liquidity, efficiency, cash flow, dividend
| Metric | Formula | Direction | Exception |
|---|---|---|---|
| D/E | Total debt ÷ Equity | Lower safer | Banks are structurally geared |
| Interest coverage | EBIT ÷ Interest | Higher safer | Watch the trend, not the level |
| Net debt / EBITDA | (Debt − Cash) ÷ EBITDA | Lower safer | Distorted for project firms |
| Current ratio | CA ÷ CL | Higher safer | Too high = idle assets |
| Quick ratio | (Cash + Securities + Receivables) ÷ CL | Higher safer | N/A for banks |
| Asset turnover | Revenue ÷ Avg assets | Higher better | Sector-specific |
| DSO | Avg receivables ÷ Revenue × 365 | Lower better | Industry credit norms differ |
| Cash conversion cycle | DSO + Inventory days − DPO | Lower better | Negative is excellent |
| Free cash flow | OCF − Capex | Higher better | Negative while investing is normal |
| Payout ratio | DPS ÷ EPS × 100 | Depends | Above 100% is unsustainable |
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