It is impossible for a single method to calculate the cost of production to work for all companies or businesses, let alone a Microsoft Excel model or method to cover it. The problem is that while each calculation requires the decoding of material and labor costs, production costs are calculated differently for different types of …
Return on equity, or ROE, is used in fundamental analysis to measure a company’s profitability. The ROE formula indicates the amount of net income that a company generates with its equity. ROE can be used to compare a company’s profitability to that of another company in the same industry. Calculate the ER in Excel The …
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The Capital Asset Pricing Model (CAPM) is part of the efficient market hypothesis and modern portfolio theory. The CAPM measures the amount of return expected from an asset, which is the first step in building an efficient frontier. The CAPM itself uses a basic equation to calculate the expected return on an asset (usually a …
Financial metrics are an important tool for measuring a company’s health. They show whether a company has enough assets to meet its obligations, whether it is operating profitably, whether its balance sheet is liquid and much more. One of the important metrics that impacts shareholders specifically is the payout ratio. distribution ratio The payout ratio …
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The Gordon Growth Model, or Dividend Discount Model (DDM), is a model for calculating a stock’s intrinsic value based on the present value of future dividends growing at a constant rate. The model assumes that a company exists forever and pays dividends that increase at a constant rate. To estimate a stock’s value, the model …
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A sum of money is not the same from one period of time to another. For example, if you won $500 in the lottery 50 years ago, you would have been richer than if you had won yesterday. This rule reflects the power of accrued interest. To assess the profitability of an investment project, you …
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A bond’s modified duration is an adjusted version of the Macaulay duration and is used to calculate changes in a bond’s duration and price for each percentage change in yield to maturity. Important points to remember The change in duration formula tells you the change in value of a bond relative to a change in …
In the bond market, convexity refers to the relationship between price and yield. When plotted, this relationship is non-linear and forms a long sloped U-curve. A bond with a high degree of convexity will experience relatively dramatic swings as interest rates move. Important points to remember Convexity is the relationship between price and yield, it …
Variance is a measure of the difference between numbers in a data set. The variance measures the distance between each number in the set and the mean. By using a data table, we can observe the linear relationship between different data points or numbers. To do this, we draw a regression line that tries to …
What is beta? If you look at Yahoo (YHOO) Finance, Google (GOOG) Finance, or other financial data providers, you may see a variable called beta alongside other financial data, such as stock price or market value. In finance, a company’s beta refers to the sensitivity of its stock price to an index or benchmark. Take …
