Business formulas: 172 calculations explained

The formulas that show up in business, finance and accounting, each with worked examples.

• Absenteeism rate A ÷ (E × W) × 100
• After-tax profit EBT × (1 − t)
• Annual pay from hourly wage w × h × 52
• Annual recurring revenue (ARR) MRR × 12
• Asset turnover R ÷ Avg A
• Average customer lifespan (months) 100 ÷ c
• Average order value Revenue ÷ Orders
• Average total cost TC ÷ Q
• Average unit cost C ÷ U
• Billable utilization B ÷ T × 100
• Book value per share E ÷ Shares
• Break-even revenue F ÷ CM ratio
• Break-even ROAS 100 ÷ m
• Break-even units F ÷ (P − V)
• Budget deficit G − T
• CAC payback (months) CAC ÷ (ARPU × GM)
• Cap rate NOI ÷ V × 100
• Capacity utilization A ÷ C × 100
• Cash conversion cycle DIO + DSO − DPO
• Cash runway (months) Cash ÷ Burn
• Cash-on-cash return CF ÷ I × 100
• Churn rate Lost ÷ Start × 100
• Click-through rate (CTR) C ÷ I × 100
• Compound annual growth (CAGR) ((End ÷ Start)^(1 ÷ n) − 1) × 100
• Compound growth P × (1 + r)ⁿ
• Consumer surplus W − P
• Contribution margin per unit P − V
• Contribution margin ratio (P − V) ÷ P × 100
• Conversion rate Buyers ÷ Visitors × 100
• Cost per click (CPC) S ÷ C
• Cost per hire C ÷ N
• Cost per lead (CPL) S ÷ L
• Cost per thousand views (CPM) S ÷ I × 1000
• Cost performance index EV ÷ AC
• Cost variance EV − AC
• Coupon payment F × c
• Credit utilization B ÷ L × 100
• Currency conversion A × rate
• Current ratio CA ÷ CL
• Current yield C ÷ P × 100
• Customer acquisition cost Marketing ÷ New customers
• Customer churn rate L ÷ S × 100
• Customer lifetime value ARPU × GM ÷ churn
• Customer retention rate (E − N) ÷ S × 100
• Days sales outstanding AR ÷ Sales × 365
• Debt ratio D ÷ A × 100
• Debt-to-equity D ÷ E
• Debt-to-GDP D ÷ GDP × 100
• Debt-to-income (DTI) D ÷ I × 100
• Defect rate D ÷ U × 100
• Depreciation tax shield D × t
• Dividend yield DPS ÷ Price × 100
• DuPont ROE (NI ÷ R) × (R ÷ A) × (A ÷ E) × 100
• Earnings per share NI ÷ Shares
• Earnings yield EPS ÷ Price × 100
• EBITDA margin EBITDA ÷ R × 100
• Economic order quantity (EOQ) √(2 × D × S ÷ H)
• Effective annual rate ((1 + r ÷ m)^m − 1) × 100
• Effective hourly rate I ÷ H
• Effective tax rate T ÷ I × 100
• Emergency fund target E × m
• Employee turnover rate Left ÷ Avg staff × 100
• Enterprise value Market cap + D − Cash
• Enterprise value multiple Enterprise value ÷ EBITDA
• Equity multiplier A ÷ E
• Expected payoff p × G − (1 − p) × L
• Free cash flow (FCF) OCF − CapEx
• Freelance hourly rate (T + E) ÷ H
• GDP by spending C + I + G + (X − M)
• GDP per capita GDP ÷ N
• Gross margin (R − COGS) ÷ R × 100
• Gross profit Revenue − COGS
• Gross rent multiplier (GRM) P ÷ R
• Growing perpetuity CF ÷ (r − g)
• Growth rate (B − A) ÷ A × 100
• Inflation rate (CPI new − CPI old) ÷ CPI old × 100
• Interest coverage ratio EBIT ÷ I
• Interest-only payment P × r ÷ 12
• Inventory turnover COGS ÷ I
• Investor ownership I ÷ V × 100
• Loan-to-value L ÷ V × 100
• LTV to CAC ratio LTV ÷ CAC
• Margin from markup M ÷ (100 + M) × 100
• Margin of safety (Sales − BE) ÷ Sales × 100
• Marginal cost ΔTC ÷ ΔQ
• Market capitalization Price × Shares
• Market share S ÷ M × 100
• Markup (P − C) ÷ C × 100
• Markup from margin G ÷ (100 − G) × 100
• Mean (average) Σx ÷ n
• Money multiple (MOIC) Exit value ÷ Invested
• Money multiplier 100 ÷ RR
• Net burn E − R
• Net operating income (NOI) I − E
• Net profit margin NI ÷ R × 100
• Net promoter score % Promoters − % Detractors
• Net worth A − L
• One-year NPV CF ÷ (1 + r) − I
• Operating leverage CM ÷ OI
• Operating margin (R − COGS − Opex) ÷ R × 100
• Order fill rate F ÷ O × 100
• Overall equipment effectiveness (OEE) A × P × Q
• Ownership dilution N ÷ (O + N) × 100
• Payback period I ÷ CF
• Payout ratio DPS ÷ EPS × 100
• PEG ratio P/E ÷ g
• Perpetuity value CF ÷ r
• PERT estimate (O + 4 × M + P) ÷ 6
• Pipeline coverage P ÷ Q
• Portfolio return w × Ra + (1 − w) × Rb
• Portfolio weight V ÷ T × 100
• Post-money valuation V + I
• Present value FV ÷ (1 + r)ⁿ
• Price elasticity %ΔQ ÷ %ΔP
• Price from target margin C ÷ (1 − m)
• Price with sales tax P × (1 + t)
• Price-to-book Price ÷ BVPS
• Price-to-earnings (P/E) Price ÷ EPS
• Producer surplus P − C
• Production yield G ÷ T × 100
• Productivity O ÷ H
• Profit margin (R − C) ÷ R × 100
• Profit per unit P − V − F ÷ Q
• Profitability index PV ÷ I
• Quick ratio (CA − Inv) ÷ CL
• Quota attainment A ÷ Q × 100
• Real GDP Nominal GDP ÷ Deflator × 100
• Real interest rate i − π
• Receivables turnover R ÷ AR
• Relative market share S ÷ T
• Rent-to-income ratio R ÷ I × 100
• Reorder point d × L + SS
• Required return (CAPM) Rf + β × (Rm − Rf)
• Retained earnings Begin + NI − Dividends
• Return on ad spend R ÷ A
• Return on assets NI ÷ A × 100
• Return on equity NI ÷ E × 100
• Return on invested capital (ROIC) NOPAT ÷ IC × 100
• Revenue per employee Revenue ÷ Staff
• ROI (G − C) ÷ C × 100
• Rule of 40 g + m
• Rule of 72 (years to double) 72 ÷ r
• Safety stock (Max − Avg) × L
• Sale price after discount P × (1 − d)
• Sales commission R × c
• Savings rate S ÷ I × 100
• Schedule performance index EV ÷ PV
• Schedule variance EV − PV
• Sharpe ratio (Rp − Rf) ÷ σ
• Simple interest P × r × t
• Spending multiplier 1 ÷ (1 − MPC)
• Startup runway (months) Cash ÷ B
• Straight-line depreciation (Cost − Salvage) ÷ Life
• Subscription break-even F ÷ (ARPU − V)
• Sustainable growth rate ROE × b
• Take-home pay G × (1 − t)
• Takt time (min per unit) T ÷ D
• Target profit units (F + T) ÷ (P − V)
• Throughput (Little's law) WIP ÷ CT
• Total cost F + V × Units
• Total revenue P × Q
• Total stock return (End − Start + D) ÷ Start × 100
• Trade balance X − M
• Unemployment rate U ÷ LF × 100
• Viral coefficient i × c
• WACC E% × Re + D% × Rd
• Win rate W ÷ N × 100
• Working capital (amount) CA − CL
• Z-score (x − μ) ÷ σ