Corporate Financial Management Formulas

Any investor interested in the fundamentals should be able to calculate financial ratios from memory. The following resources have been taken from the Investing for Beginners site; they will teach you how to calculate many financial ratios based using annual reports and financial statements. Each ratio has several examples for reference purposes.

An Introduction to Capital Structure
A company's capital structure is one of the most important decisions management has to make because it influences everything from the firm's risk profile to the financial ratios such as return on equity and interest coverage. In this resources, we examine why capital structure matters and the components that make up the capital structure of any company, no matter how large or small.

Price to Cash Flow Ratio
Some investors prefer to focus on a financial ratio known the price to cash flow ratio instead of the more famous price to earnings ratio (or p/e ratio for short). Why do they prefer the price to cash flow ratio and why is it better for some companies and industry than its more famous counterpart? Sit back, relax, and grab a cup of coffee because you're about to learn everything you ever wanted to know about why it is more important than the price to earnings ratio.

The 5 Categories of Financial Ratios
There are five categories of financial ratios into which most calculations fall. Here, we explain what they are to help you understand how to organize your own financial analysis when valuing a stock or bond.

Using the PEG Ratio to Find Hidden Stock Gems
The PEG ratio is a modified form of the price to earnings ratio and can help you factor in the underlying growth in a company's earnings per share to determine its relative value. Many of the most successful investors including Peter Lynch use the PEG ratio to help value stocks.

Enterprise Value - Determining the Takeover Value of a Company
Enterprise value is the takeover value of a company. Enterprise value is calculated by adding a corporation’s market capitalization, preferred stock, and outstanding debt together and then subtracting out the cash and cash equivalents

Return on Equity - The DuPont Model
The best way to perform a return on equity calculation, or ROE as it is sometimes abbreviated, is to do what is known as a DuPont analysis.

Asset Turnover Ratio - Financial Ratio #1
The asset turnover financial ratio calculates the total sales for each dollar of asset a company owns. It measures a company's efficiency in using its assets.

Current Ratio - Financial Ratio #2
The current ratio is one of the most famous of all financial ratios. It serves as a test of a company's financial strength and relative efficiency [i.e., does a company have too much cash on hand or not enough?]