10 entries
Guides
Step-by-step how-to guides for finance calculations: formula, worked example, common mistakes and FAQs.
- How to Calculate Compound Interest (Formula and Example) How to calculate compound interest: A = P(1 + r/n)^(nt). Step-by-step method, worked example with yearly and monthly compounding, and the Rule of 72 shortcut.
- How to Calculate Days Cash on Hand How to calculate days cash on hand: cash and equivalents divided by daily operating expenses. Formula, worked example and how to read the result.
- How to Calculate Dividend Yield (Formula and Example) How to calculate dividend yield: annual dividends per share divided by share price. Step-by-step formula, worked example and the mistakes that distort it.
- How to Calculate Free Cash Flow (Formula and Example) How to calculate free cash flow: operating cash flow minus capital expenditures. Worked example, the alternative EBIT-based method, and common mistakes.
- How to Calculate the Current Ratio How to calculate the current ratio: current assets divided by current liabilities. Worked example, interpretation and common errors when assessing liquidity.
- How to Calculate the Debt-to-Equity Ratio How to calculate debt-to-equity: total liabilities divided by shareholders' equity. Worked example, what counts as debt, and how to read the result.
- How to Calculate the P/E Ratio (With Example) How to calculate the price-to-earnings (P/E) ratio: divide share price by earnings per share. Step-by-step method, worked example, trailing vs forward P/E and common mistakes.
- How to Calculate the Sharpe Ratio How to calculate the Sharpe ratio: portfolio return minus the risk-free rate, divided by the standard deviation of returns. Worked example and interpretation.
- How to Calculate WACC (Weighted Average Cost of Capital) How to calculate WACC: weight the cost of equity and the after-tax cost of debt by their share of capital. Formula, worked example and common mistakes.
- How to Calculate Yield to Maturity (Approximation and Example) How to estimate yield to maturity on a bond with the approximation formula, plus a worked example and why the exact value needs iteration or a calculator.
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