What is the Price Earnings Ratio? The Price Earnings Ratio (P/E Ratio) is the relationship between a company’s stock price and earnings per share (EPS). It is a popular ratio that gives investors a better sense of the value of the company. The P/E ratio shows the expectations of the market and is the price…
CFI’s Profit and Loss (P&L) template offers a free downloadable Excel file to create monthly and annual income statements. The template allows users to input their data, which then automatically generates financial statements. The following guide includes instructions for using and modifying the templates, highlighting key components like revenue, expenses, and net earnings. The tools…
What is the Proper Business Letter Format? A business letter should always follow a certain format and structure to ensure it is received as professional and up-to-standard. While there are many different types of business letters, this guide will go through a detailed example of the most classic business letter format. Business Letter Overview In…
What is the Free Cash Flow (FCF) Formula? The generic Free Cash Flow (FCF) Formula is equal to Cash from Operations minus Capital Expenditures. FCF represents the amount of cash generated by a business, after accounting for reinvestment in non-current capital assets by the company. This figure is also sometimes compared to Free Cash Flow to…
What is the NPV Formula? The NPV formula is a way of calculating the Net Present Value (NPV) of a series of cash flows based on a specified discount rate. The NPV formula can be very useful for financial analysis and financial modeling when determining the value of an investment (a company, a project, a cost-saving…
What is Knowledge vs. Wisdom? Knowledge vs. wisdom may be thought of as two sides of the same coin, but they are distinctly different things. Knowledge can simply be thought of as possessing “information,” while wisdom can be thought of as possessing “experience.” They are not mutually exclusive nor inherently inclusive: Knowledge is not required…
What is Maintenance Margin? Maintenance margin is the total amount of capital that must remain in an investment account in order to hold an investment or trading position and avoid a margin call. To better understand what a maintenance margin is, it’s important to review the underlying concepts of margin accounts and margin calls. Breaking…
What is a Personal Budget Spreadsheet? A personal budget spreadsheet offers an individual a way to determine the state of his finances and help him or her plan spending over the course of a period of usually a month or a year. It may very well be everyone’s best friend as it is the most helpful tool…
What is Investment Value? Investment value is the amount of money an investor would pay for a piece of property. It refers to an asset’s specific value based on certain parameters. Investment value represents an individual’s measurement of the asset’s property value. Potential investors often adopt an investment value metric when they decide to invest…
What are Valuation Principles? Business valuation involves the determination of the fair economic value of a company or business for various reasons such as sale value, divorce litigation, and the establishment of partner ownership. Image: CFI’s Business Valuation Modeling Course. Key Principles of Business Valuation The following are the key principles of business…
