Brian Feroldi on LinkedIn: Investing Abbreviations Cheat Sheet If you want to invest, you MUST… | 29 comments (2024)

explained in detail......

Profit Ratios every investor should know: 💸Accounting is the language of business.Level up your business & investing skills by memorizing these ratios:1: Gross Margin➡️What: The percentage of revenue that is translated into gross profit.🟰 Formula: Gross Profit / Sales2: EBITDA Margin➡️What: The percentage of sales that turns into profit before interest, taxes, depreciation, and amortization are subtracted.🟰 Formula: EBITDA / Sales3: Operating Margin➡️What: The percentage of sales that turn into operating income.🟰 Formula: Operating Income / Sales4: EBIT Margin➡️What: The percentage of sales that turns into profit before interest & taxes are subtracted.🟰 Formula: Earnings Before Interest & Taxes / Sales5: EBT Margin (Pre-Tax Margin)➡️What: Percentage of sales that turn into operating income.🟰 Formula? Earnings Before Taxes / Sales6: Net Profit Margin➡️What: Percentage of sales that remains as profit after all costs are subtracted.🟰 Formula: Net Income / Sales7: Free Cash Flow Margin➡️What: The percentage of sales translated into free cash flow.🟰 Formula: Free Cash Flow / Sales8: Earnings Per Share (EPS)➡️What: How much money a company makes for each share outstanding.🟰 Formula: Net Income / Shares Outstanding9: Return On Assets (ROA)➡️What: How much profit a company generates from its total assets.🟰 Formula: Net Income / Total Assets10: Return On Equity (ROE)➡️What: Measures how profitable a company is in relation to its equity (the money shareholders have invested in the business).🟰 Formula: Net Income / Equity11: Return On Invested Capital (ROIC)➡️What: Shows you how efficiently a company is allocating capital.🟰 Formula: NOPAT / Total Invested Capital12: Return On Capital Employed (ROCE)➡️What: Measures the profitability of a company and the efficiency with which it uses its capital.🟰 Formula: EBIT / Long-Term Debt + Equity13: Free Cash Flow Conversion➡️What: Measures how much earnings are translated into free cash flow🟰 Formula: Free Cash Flow / Net Income14: Owner's Earnings➡️What: Measures how much cash can be taken out of the business and given to owners🟰 Formula: Net Income + (Depreciation & Amortization) +/- Non Cash Charges - Maintenance Capex +/-Changes in working capitalWhat ratios do you track before making an investment? Let me know in the comments section below!FollowLong Term Mindset for more content like this.***Want to master the basics of accounting (for free)?Enroll in our free, 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English.Check it out here (It's free) →https://lnkd.in/eKbRV7g6If this post was helpful, repost it ♻️ to share with your audience.

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Reasons Change – So Can YouByRobert MoskowitzThere’s a financial system calledZero-Based Budgeting, once extremely fashionable and still used in some companies, that requires every recurring expenditure to be fully reconsidered each time it comes up. In other words, just because a company spent a certain amount on an item last year doesn’t mean it should spend that same amount – or any amount – again this year. The idea is to start at zero and justify every dollar of spending.It’s an interesting principle you can apply far more widely than dollars and cents:https://lnkd.in/giU6H-TZ

14 Profit Ratios every investor should know: 💸Accounting is the language of business.Level up your business & investing skills by memorizing these ratios:1: Gross Margin➡️What: The percentage of revenue that is translated into gross profit.🟰 Formula: Gross Profit / Sales2: EBITDA Margin➡️What: The percentage of sales that turns into profit before interest, taxes, depreciation, and amortization are subtracted.🟰 Formula: EBITDA / Sales3: Operating Margin➡️What: The percentage of sales that turn into operating income.🟰 Formula: Operating Income / Sales4: EBIT Margin➡️What: The percentage of sales that turns into profit before interest & taxes are subtracted.🟰 Formula: Earnings Before Interest & Taxes / Sales5: EBT Margin (Pre-Tax Margin)➡️What: Percentage of sales that turn into operating income.🟰 Formula? Earnings Before Taxes / Sales6: Net Profit Margin➡️What: Percentage of sales that remains as profit after all costs are subtracted.🟰 Formula: Net Income / Sales7: Free Cash Flow Margin➡️What: The percentage of sales translated into free cash flow.🟰 Formula: Free Cash Flow / Sales8: Earnings Per Share (EPS)➡️What: How much money a company makes for each share outstanding.🟰 Formula: Net Income / Shares Outstanding9: Return On Assets (ROA)➡️What: How much profit a company generates from its total assets.🟰 Formula: Net Income / Total Assets10: Return On Equity (ROE)➡️What: Measures how profitable a company is in relation to its equity (the money shareholders have invested in the business).🟰 Formula: Net Income / Equity11: Return On Invested Capital (ROIC)➡️What: Shows you how efficiently a company is allocating capital.🟰 Formula: NOPAT / Total Invested Capital12: Return On Capital Employed (ROCE)➡️What: Measures the profitability of a company and the efficiency with which it uses its capital.🟰 Formula: EBIT / Long-Term Debt + Equity13: Free Cash Flow Conversion➡️What: Measures how much earnings are translated into free cash flow🟰 Formula: Free Cash Flow / Net Income14: Owner's Earnings➡️What: Measures how much cash can be taken out of the business and given to owners🟰 Formula: Net Income + (Depreciation & Amortization) +/- Non Cash Charges - Maintenance Capex +/-Changes in working capitalWhat ratios do you track before making an investment? Let me know in the comments section below!-----------Hi 👋 - thanks for reading!________➕ Follow meNafees Ul Hassan ✨Virtual Bookkeeping and Ecom Expert✨for more content like this.________#entrepreneur#finance#business#bookkeeping#accounting#professionalgrowth#personalgrowthjourney#bookkeepingservices#accountant#bookkeeper#growthmindset#trendingtopic#balancesheet#financialadviser#financialanalysis#financialcheatsheet#cashflow#financialstatements#corporate

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Heads and Leaders should aware….

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💎 Are you looking to gain a better understanding of a company's profitability and performance?💎 Do you know what EBITDA stands for? It stands for Earnings Before Interest, Taxes, Depreciation, and Amortization and is a financial metric that provides a comprehensive view of a company's profitability.🛑 EBITDA is not a standardized accounting measure, but it is widely used in many industries to help evaluate and benchmark companies. It focuses solely on a company's core operations and can provide a clearer picture of its ability to generate profits.🛑 It is important to note that EBITDA has its limitations. While it provides a useful measure of operational performance, it does not reflect a company's cash flow or its ability to generate sustainable long-term profits.💎 EBITDA can be particularly useful when analyzing companies with different capital structures. By excluding interest expenses, EBITDA provides a clearer view of a company's operating performance, regardless of its debt levels or financing decisions.💎 EBITDA can also be a valuable tool for investors and analysts when assessing the financial health of a company. By providing a clearer view of a company's operating performance, EBITDA helps to identify potential areas of improvement or areas of concern.💎 EBITDA allows for easier comparisons between companies within the same industry. Since EBITDA eliminates the impact of different tax rates, financing structures, and depreciation policies, it provides a standardized metric for benchmarking and evaluating operational efficiency.Read our blog to learn more about the benefits of tracking EBITDA!https://lnkd.in/gkN79aqX#finance#accountingquestions#founders#businessowners#EBITDA#accounting#controllerservices

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An easy way to forecast capex ↓Here's my favorite part about the budgeting process:It's late October... Revenue and EBITDA look good,you're about to hit submit, and then from the shadows someone yells,"𝙬𝙖𝙞𝙩, 𝙬𝙝𝙖𝙩 𝙖𝙗𝙤𝙪𝙩 𝙘𝙖𝙥𝙚𝙭?"Everyone looks around and then the "ohhhhh whoops" feeling sets in.We forgot capex. Completely.Why? It's not part of the P&L so it often gets overlooked until the end.The truth is —𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗘𝘅𝗽𝗲𝗻𝗱𝗶𝘁𝘂𝗿𝗲𝘀 𝗼𝗿 "𝗖𝗮𝗽𝗲𝘅" 𝗶𝘀 𝗶𝘁'𝘀 𝗼𝘄𝗻 𝘀𝗲𝗽𝗮𝗿𝗮𝘁𝗲 𝗯𝘂𝗱𝗴𝗲𝘁.It just happens to hit the Balance Sheet (& therefore Cash Flow Statement) instead of the P&L.———There's good news, however — it's actually a fairly easy process.But first, what is "capex"?"𝗖𝗮𝗽𝗲𝘅" 𝗶𝘀 𝗰𝗮𝘀𝗵 𝘄𝗲 𝘀𝗽𝗲𝗻𝗱 𝘁𝗼𝗱𝗮𝘆 (𝘁𝗼 𝗮𝗰𝗾𝘂𝗶𝗿𝗲 𝗮𝗻 𝗮𝘀𝘀𝗲𝘁) 𝘁𝗵𝗮𝘁 𝗯𝗲𝗻𝗲𝗳𝗶𝘁𝘀 𝘂𝘀 𝗶𝗻 𝘁𝗵𝗲 𝗳𝘂𝘁𝘂𝗿𝗲.We depreciate the 𝗰𝗼𝘀𝘁 in the future to satisfy the "matching principle"Why depreciate?Well if I buy a delivery truck, that truck will help me generate Revenue over the next [7] years or so (by making deliveries).So, I need to "match" its cost against the Revenue it helps me generate.———So with that in mind, here's how we can build it:Take a look at the image below...I've got two identical sections (in terms of layout) that do slightly different things.The first is the "capex" section, and this is where I list the actual project and what it will cost.So the very first entry, I'm saying, "I'd like to buy a $75,000 truck in February of 2027 and I think it will last me 8 years (the "useful life")."And you can see over to the right the 𝗰𝗮𝘀𝗵 𝗶𝗺𝗽𝗮𝗰𝘁 -- $75,000 goes out in February of 2027.———Now, the second section:You can see that same new truck is listed at the top, but over to the right it's different...In February 2027 you see $781 that continues monthly.That is the 𝗱𝗲𝗽𝗿𝗲𝗰𝗶𝗮𝘁𝗶𝗼𝗻 = $75,000 / 8 years / 12 months = $781 per month.Effectively, the depreciation makes an accounting adjustment to my cash cost so that the expense of the asset 𝙢𝙖𝙩𝙘𝙝𝙚𝙨 the Revenue it helps create.———From there, it's just a link-up to my 3 Statement Model:✅ (1) the Capex links to the Fixed Asset account like this:◼️ Prior Period balance 𝘱𝘭𝘶𝘴 the new Capex(if done correctly, this will let me see the $75,000 in the Cash Flow Statement)✅ (2) the Depreciation links to my Income Statement, and;✅ (3) it gets captured on my Balance Sheet in Accumulated Depreciation◼️ Prior Period balance 𝘱𝘭𝘶𝘴 the new Depreciation(if done correctly, this will zero out any "cash impact" of Depreciation in my Cash Flow Statement)———The net impact of it all?I'm showing the cash out the door today, but also have the correct accounting treatment of depreciating the cost in the future 👍𝙒𝙖𝙣𝙩 𝙩𝙝𝙚 𝙩𝙚𝙢𝙥𝙡𝙖𝙩𝙚?Download it for free in the comments below 🔽

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Unlock Growth for Small Businesses with Budgeting: Learn how budgeting isn't just for finance teams but a tool for the whole organization. Perfect for accountants and business owners looking to maximize growth potential. https://oal.lu/TpxFl #QuickBooksSolutionProvider

Knowing where things are in a budget plan is pretty important as we begin trudging through FY25.I don't just mean, "did my cool product make the cut for Q2 this year?"I mean which categories & departments will be bear the financial cost too.I'm no finance guru, but I do know that which bucket of funds my solution is pulling from is going to have an impact.Is my solution in the Marketing team's budget?I once had a CEO describe the marketing budget as a black hole, so this may be under real time scrutiny in a down market.Am I a part of the Operations budget?This can be pretty cool actually, my understanding is that when reporting, this one doesn't always get line by line expenditure scrutiny until strategic times in the year.Also, operations budget almost always has built in room for growth, so all-in-all not a bad area to target.Sales, Product, IT, Finance (yes, even the CF-No's team) will all have their funds and have a different set of "keys" for unlocking access to them.Knowing personas remains extremely important, but also knowing how things are reported can allow more flexibility, especially mid-cycle.Taking this a step further, if my target company issues earning statements or is publicly traded with the required reporting, I take good hard looks at those resources.Explicit goals are listed for each part of the business, and the vision overall for the company.This allows the potential of multiple teams being involved and spread loading budget for any future solutions.I'm no expert, and I am quite often wrong.This is just what I've learned over time and what helps me plan.

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Unlock Growth for Small Businesses with Budgeting: Learn how budgeting isn't just for finance teams but a tool for the whole organization. Perfect for accountants and business owners looking to maximize growth potential. https://oal.lu/f3A7i #BaytekLLC