Break-even analysis is the study of the amount of sales or units sold required to break even after all fixed and variable costs of running the business have been taken into account. Break-even analysis is essential in business planning and finance because assumptions about costs and potential revenue determine whether a company (or project) is …
What is linear regression? Linear regression is a plot of data that graphically depicts the linear relationship between an independent variable and a dependent variable. It is typically used to visually show the strength of the relationship and the spread of the results—all for the purpose of explaining the behavior of the dependent variable. Suppose …
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Loan repayment is the repayment of money previously borrowed from a lender, usually in a series of regular payments consisting of principal plus interest. Did you know that you can use Excel software to calculate your loan repayments? This article is a step-by-step guide to setting up credit calculation. Important points to remember Get a …
What is amortization? Depreciation is a common accounting technique that spreads the cost of a company’s fixed assets over the useful life of the assets. In other words, it spreads a portion of the cost of a company’s fixed assets over the periods when the fixed assets helped generate revenue. Companies write off their long-lived …
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The internal rate of return (IRR) is the discount rate that provides a net zero value for a future series of cash flows. IRR and Net Present Value (NPV) are used to screen investments based on returns. Difference between IRR and NPV The key difference between IRR and NPV is that NPV is an actual …
The Debt Service Coverage Ratio (DSCR) is used in corporate finance to measure the amount of a company’s cash flow that is available to pay off its ongoing debt payments or obligations. The DSCR compares a company’s operating income to the various debts coming due over the next year, including rent, interest and principal. Investors …
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Net present value (NPV) is an essential part of a company’s budget. It is a comprehensive method to calculate whether a proposed project is financially viable or not. The NPV calculation incorporates many financial topics into one formula: cash flow, time value of money, discount rate over the life of the project (usually WACC), terminal …
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The price-to-earnings (P/E) ratio is a valuation metric that measures a company’s earnings — based on expected earnings per share — and compares it to the current stock price. Companies forecast earnings for each quarter using earnings per share (EPS), which is a company’s earnings divided by the number of common shares outstanding. Generally, when …
How to calculate a company’s forecast P/E ratio in Excel? Read More »
Investors can use Excel to perform technical calculations or create basic accounting ratios. Businesses can use Excel to perform capital budget analysis, risk analysis, or cash flow discounting. Options traders often use Excel to set prices using the Black-Scholes method. There are hundreds of standard financial analysis templates that can be run from Excel. Excel …
Microsoft Excel is a powerful tool that can be used for a variety of reasons. For a small business with few transactions, a savvy business owner can use Excel as a replacement for accounting software. Excel has all the tools needed to create and maintain a great general ledger, but requires a solid understanding of …
