Formula sheet

Assets = Liabilities + Equity

Always balanced — the fundamental accounting identity.

WC = Current Assets − Current Liabilities

Positive WC means the firm can meet short-term obligations.

WC

Working capital

Gross Profit = Revenue − COGS

Profit after direct production costs, before operating expenses.

COGS

Cost of goods sold

EBIT = Gross Profit − Operating Expenses

Earnings Before Interest and Tax — the core operating result.

EBIT

Earnings Before Interest & Tax

Net Profit = EBT − Income Tax

Bottom line after interest and tax.

EBT

Earnings Before Tax (EBIT − Interest)

GP Margin = (Gross Profit ÷ Revenue) × 100

% of revenue remaining after cost of goods sold.

Net Margin = (Net Income ÷ Revenue) × 100

Bottom-line profitability as a % of revenue.

ROE = Net Income ÷ Shareholders' Equity

Profit generated per unit of shareholder investment.

D/E = Total Debt ÷ Total Equity

Higher D/E = more financial leverage and risk.

ICR = EBIT ÷ Interest Expense

How many times over operating profit covers the interest bill.

ICR

Interest Coverage Ratio

EBIT

Earnings Before Interest & Tax

AT = Revenue ÷ Total Assets

How efficiently assets generate sales — higher is better.

ROE = Net Margin × Asset Turnover × Equity Multiplier

Decomposes ROE into profitability, efficiency, and leverage.

Equity Multiplier

Total Assets ÷ Shareholders' Equity

Real Rate ≈ Nominal Rate − Inflation Rate

Strips inflation from the quoted rate to show real purchasing-power gain.

FV = PV × (1 + r)^t

FV

Future value

PV

Present value

r

Interest rate per period

t

Number of periods

PV = FV ÷ (1 + r)^t

Discount a future cash flow back to today's value.

CY = Annual Coupon ÷ Market Price

The bond's annual income as a % of its current trading price.

CY

Current yield

↑ Interest Rates → ↓ Bond Price (and vice versa)

Inverse relationship: fixed coupon is less attractive when new rates rise.

NPV = Σ [CFt ÷ (1 + r)^t] − C₀

Accept the project if NPV > 0.

CFt

Cash flow in period t

r

Discount rate (usually WACC)

C₀

Initial investment (at t = 0)

Accept if IRR > Required Rate of Return

IRR is the discount rate at which NPV = 0.

IRR

Internal Rate of Return

WACC = (E/V)·Ke + (D/V)·Kd·(1 − T)

The blended required return across all funders.

E/V

Equity as a fraction of total capital

D/V

Debt as a fraction of total capital

Ke

Cost of equity

Kd

Pre-tax cost of debt

T

Corporate tax rate (debt interest is tax-deductible)

E(r) = Rf + β × (Rm − Rf)

Estimates the required return on equity based on systematic risk.

E(r)

Expected return on the asset

Rf

Risk-free rate (e.g. government bond yield)

β

Beta — sensitivity to market movements

Rm − Rf

Market risk premium