Math Flashcards
(98 cards)
Profit Formula (3)
Rev – Costs
(Price)(Q) – (VC)(Q) – FC
(Marginal Profit)(Q) – FC
Marginal Cost Definition & Formula
Definition: Incremental change in profit resulting from selling one more unit
Formula: Price - VC
When someone asks “Gross Profit Margin”, always clarify if they mean…
Gross Profit, Operating Profit, Net Profit, or Contribution Margin
Gross Profit Margin Formula & Value
[(Revenue – COGS) / (Revenue)] x 100%
How efficiently a company produces or sources its products. Excludes operating expenses like marketing, salaries, and rent. It’s used to assess: Manufacturing efficiency, Supplier costs, and Pricing strategy
Operating Profit (EBIT) Margin Formula & Value
OperatingProfitMargin = [Operating Income (aka EBIT) / Revenue]
It tells you core business profitability after operating costs (salaries, marketing, rent), but before interest and taxes
Net Profit Margin Formula & Value
Net Profit Margin = [(Net Income / Revenue)] x 100%
It tells you the “bottom line” profit after all expenses — operating costs, interest, taxes, one-time items, etc.
It’s used to assess Overall profitability, Return to shareholders, What’s left after everything is paid
Contribution Margin Formula & Value
Contribution Margin = [(Revenue - VC)/Revenue] x 100%
It’s used to assess: Profitability per unit or product line, Which products are worth scaling, Sensitivity to volume changes, Unit-level analysis, break-even, scaling
Market Sizing Formula
(total pop.) x (penetration rate) x (frequency) x (price)
Growth Rate Formula or % change
[(Fx - Ct) / Ct.] x 100%
Breakeven Profit Formula
(MP)(Total Q) – Total FC = Profit
Breakeven Quantity Formula
Quantity = (FC + Profit) / MP
ROI Formula
Profit / ii
[(Sales Pr. - Purchase Pr.) / (Purchase Pr.)] x 100%
It’s the same as the growth formula! [(New - Old)/Old] x 100%
Present Value Formula
(FCF / Discount Rate) - ii
It’s safe to assume standard discount rate 10% if not provided.
If perpetuity, growth rate should not exceed country GDP (<5%)
Payback Period Formula
[ii (- salvage value of item being replaced)] / incremental profit
Parentheses are present because salvage value isn’t always relevant
Expected Value Formula
(value) x (prob. of occurrence)
Probability is generally provided and is an industry standard.
Asset Utilization Formula
Capacity Utilized / Capacity Available
K Trick for Thousand, Million, Billion
Thousand = K
Million = K x K
Billion = K x K x K
Whenever currency is mentioned, always confirm if it’s in…
USD! One of the biggest mistakes made by candidates is not confirming this.
Market Sizing: When a product or service is used by individual customers in the US, assume X number of customers.
Use 320Mn, assuming 80 years of
life expectancy; therefore 4 customer segments (0-20, 20-40, 40-60, 60-80)
Market Sizing: When a product is shared by household, assume X ppl per household and Y total indivduals so Z households.
3 ppl per HH
300Mn total individuals
100Mn households (but in reality 128)
1/11
0.09
0.09
1/11
1/12
0.083
0.083
1/12
