173 lines
5.0 KiB
Markdown
173 lines
5.0 KiB
Markdown
# Financial Metrics Reference
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## Profitability Metrics
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**Gross Profit Margin**
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- Formula: (Revenue - COGS) / Revenue × 100
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- Measures: Production efficiency and pricing power
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- Higher is better; compare to industry average
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**Operating Profit Margin**
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- Formula: Operating Income / Revenue × 100
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- Measures: Operational efficiency
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- Excludes financing and tax effects
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**Net Profit Margin**
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- Formula: Net Income / Revenue × 100
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- Measures: Overall profitability after all expenses
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- Bottom line efficiency
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**Return on Equity (ROE)**
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- Formula: Net Income / Shareholders' Equity × 100
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- Measures: Profitability relative to shareholder investment
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- DuPont Analysis: ROE = Net Margin × Asset Turnover × Equity Multiplier
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**Return on Assets (ROA)**
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- Formula: Net Income / Total Assets × 100
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- Measures: Efficiency in using assets to generate profit
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**Return on Invested Capital (ROIC)**
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- Formula: NOPAT / Invested Capital × 100
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- NOPAT = Net Operating Profit After Tax
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- Invested Capital = Total Debt + Total Equity - Cash
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- Measures: Return on all capital (debt + equity)
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## Valuation Metrics
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**Price-to-Earnings (P/E) Ratio**
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- Formula: Stock Price / Earnings Per Share
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- Trailing P/E: Uses past 12 months earnings
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- Forward P/E: Uses estimated future earnings
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- Interpretation: Higher P/E = higher growth expectations or overvaluation
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**Price-to-Earnings-to-Growth (PEG) Ratio**
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- Formula: P/E Ratio / Earnings Growth Rate
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- Interpretation: PEG < 1 potentially undervalued; PEG > 1 potentially overvalued
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**Price-to-Book (P/B) Ratio**
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- Formula: Stock Price / Book Value Per Share
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- Book Value = Total Assets - Total Liabilities
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- Useful for asset-heavy industries
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**Price-to-Sales (P/S) Ratio**
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- Formula: Market Cap / Total Revenue
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- Useful for unprofitable companies or comparing revenue multiples
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**Enterprise Value (EV)**
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- Formula: Market Cap + Total Debt - Cash
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- Represents total company value
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**EV/EBITDA**
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- Formula: Enterprise Value / EBITDA
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- EBITDA = Earnings Before Interest, Tax, Depreciation, Amortization
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- Capital structure neutral valuation metric
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**EV/Sales**
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- Formula: Enterprise Value / Revenue
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- Useful when comparing companies with different profitability
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**Dividend Yield**
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- Formula: Annual Dividend Per Share / Stock Price × 100
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- Measures: Income return from stock
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## Growth Metrics
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**Revenue Growth Rate**
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- Formula: (Current Revenue - Prior Revenue) / Prior Revenue × 100
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- YoY (Year-over-Year), QoQ (Quarter-over-Quarter)
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**Earnings Per Share (EPS) Growth**
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- Formula: (Current EPS - Prior EPS) / Prior EPS × 100
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- Track both reported and adjusted EPS
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**Compound Annual Growth Rate (CAGR)**
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- Formula: (Ending Value / Beginning Value)^(1/Years) - 1
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- Smoothed growth rate over multiple years
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## Liquidity Metrics
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**Current Ratio**
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- Formula: Current Assets / Current Liabilities
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- Measures: Short-term liquidity
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- > 1.5 generally considered healthy
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**Quick Ratio (Acid-Test)**
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- Formula: (Current Assets - Inventory) / Current Liabilities
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- More conservative than current ratio
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- > 1.0 generally considered healthy
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**Cash Ratio**
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- Formula: Cash and Cash Equivalents / Current Liabilities
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- Most conservative liquidity measure
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## Leverage Metrics
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**Debt-to-Equity (D/E) Ratio**
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- Formula: Total Debt / Total Equity
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- Measures: Financial leverage
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- Industry-dependent; lower generally safer
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**Debt-to-Assets Ratio**
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- Formula: Total Debt / Total Assets
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- Shows proportion of assets financed by debt
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**Interest Coverage Ratio**
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- Formula: EBIT / Interest Expense
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- Measures: Ability to pay interest
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- > 2.5 generally considered safe
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## Efficiency Metrics
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**Asset Turnover**
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- Formula: Revenue / Average Total Assets
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- Measures: Efficiency in using assets to generate sales
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**Inventory Turnover**
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- Formula: COGS / Average Inventory
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- Higher = more efficient inventory management
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**Receivables Turnover**
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- Formula: Revenue / Average Accounts Receivable
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- Days Sales Outstanding (DSO) = 365 / Receivables Turnover
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## Cash Flow Metrics
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**Free Cash Flow (FCF)**
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- Formula: Operating Cash Flow - Capital Expenditures
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- Available cash for dividends, buybacks, debt repayment
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**FCF Yield**
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- Formula: Free Cash Flow Per Share / Stock Price × 100
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- Similar to dividend yield but for total cash generation
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**Cash Conversion Rate**
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- Formula: Free Cash Flow / Net Income
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- Should be close to or > 100%
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- Lower ratio may indicate earnings quality issues
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## Per Share Metrics
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**Earnings Per Share (EPS)**
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- Formula: Net Income / Weighted Average Shares Outstanding
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- Basic EPS vs Diluted EPS (includes options, convertibles)
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**Book Value Per Share**
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- Formula: (Total Assets - Total Liabilities) / Shares Outstanding
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**Cash Flow Per Share**
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- Formula: Operating Cash Flow / Shares Outstanding
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## Share Metrics
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**Shares Outstanding**
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- Total shares issued and held by investors
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- Track dilution over time
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**Float**
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- Shares available for public trading
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- Excludes insider and restricted shares
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**Share Buybacks**
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- Track net share reduction/increase
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- Buybacks can boost EPS without earnings growth
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