Catalog / Business & Finance Essentials
Business & Finance Essentials
A concise cheat sheet covering essential concepts and formulas in business and finance, designed for quick reference.
Financial Accounting Basics
Key Financial Statements
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Income Statement |
Reports a company’s financial performance over a specific period through revenues, expenses, gains, and losses. Formula: |
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Balance Sheet |
A snapshot of a company’s assets, liabilities, and equity at a specific point in time. Formula: |
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Cash Flow Statement |
Tracks the movement of cash both into and out of a company over a period of time. Sections: Operating Activities, Investing Activities, Financing Activities |
Accounting Equation
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The fundamental accounting equation forms the basis for the balance sheet:
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Important Ratios
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Current Ratio |
Measures a company’s ability to pay short-term obligations. Formula: |
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Debt-to-Equity Ratio |
Indicates the proportion of debt and equity used to finance a company’s assets. Formula: |
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Profit Margin |
Shows how much out of each dollar of sales a company actually keeps in earnings. Formula: |
Corporate Finance
Capital Budgeting
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Net Present Value (NPV) |
Calculates the present value of expected cash inflows less the present value of expected cash outflows. Formula: |
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Internal Rate of Return (IRR) |
The discount rate that makes the NPV of all cash flows from a particular project equal to zero. Used to evaluate the attractiveness of a project or investment. Find the rate where |
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Payback Period |
The length of time required to recover the cost of an investment. Formula: |
Working Capital Management
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Managing current assets and current liabilities to ensure a company has enough liquidity to meet its short-term obligations. Key components include:
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Cost of Capital
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Weighted Average Cost of Capital (WACC) |
The average rate of return a company expects to compensate all its different investors. Formula: Where:
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Investment Analysis
Valuation Metrics
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Price-to-Earnings (P/E) Ratio |
Compares a company’s stock price to its earnings per share. Formula: |
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Price-to-Book (P/B) Ratio |
Compares a company’s market capitalization to its book value of equity. Formula: |
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Dividend Yield |
Measures the return on investment from dividends. Formula: |
Risk and Return
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Understanding the relationship between risk and return is crucial for investment decisions.
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Time Value of Money
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Present Value (PV) |
The current value of a future sum of money or stream of cash flows, given a specified rate of return. Formula: Where:
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Future Value (FV) |
The value of an asset or investment at a specified date in the future, based on an assumed rate of growth. Formula: |
Economic Indicators
Key Economic Indicators
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GDP (Gross Domestic Product) |
The total value of goods and services produced in a country in a year. A primary indicator of economic health. Increased GDP = Economic Growth |
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Inflation Rate |
The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. Measured by the Consumer Price Index (CPI) |
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Unemployment Rate |
The percentage of the labor force that is unemployed. Indicates the health of the labor market. Lower Unemployment Rate = Healthier Economy |
Monetary Policy
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Actions undertaken by a central bank to manipulate the money supply and credit conditions to stimulate or restrain economic activity. Tools include:
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Fiscal Policy
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Government Spending |
Government expenditure on goods and services. Increased spending can stimulate economic growth. |
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Taxation |
Levying taxes to finance government spending. Tax cuts can stimulate consumer spending and investment. |