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Business Strategy Calculations

Calculations

Calculations and Ratios presents the essential mathematical tools the finance professional needs for finding solutions to daily numerical problems. This section includes how to calculate return on investment, return on shareholders' equity, working capital productivity, EVA, risk-adjusted rate of return, CAPM, and many more.

  • Binomial Distribution
    This refers to the number of incidences of a specific outcome in a series of events or trials. For example, how many times you throw the number three when rolling a die 10 times.
  • Economic Value Added
    A company’s financial performance—specifically, whether it is earning more or less than the total cost of the capital supporting it.
  • Elasticity
    The percentage change of one variable caused by a percentage change in another variable.
  • Payback Period
    How long it will take to earn back the money invested in a project.
  • Reading an Annual Report
    Many companies must publish an annual report to its stockholders as a matter of corporate law. The primary purpose of this report is to inform stockholders of the company’s performance. As a legal requirement, the report usually contains a profit and loss account, a balance sheet, a cash flow statement, a directors’ report, and an auditors’ report. The different elements tell you about different aspects of the company’s performance and can be...
  • Scenario Analysis
    Businesses have always planned for “what if” scenarios—and based their decision-making on likely future events. Scenario analysis is simply a formal tool to model the likelihood of various scenarios and their outcomes. Scenario analysis has been widely used in asset management and risk management since the 1970s, to analyze interest rate risks. However, it can be applied to a wide set of corporate and financial activities, including equity...
  • Statistical Process Control Methods
    Statistical Process Control (SPC) is a tool for monitoring and controlling variation in processes such as manufacturing of goods, testing, or statistical results. It was created in the 1920s by Dr W. Edwards Deming, who claimed the majority of variation was due to operator over-adjustment. SPC requires an organization to:determine the process parameters that need to be monitored; create a control chart to confirm the process is under...

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