Magnimetrics Library
Practical guides that help finance professionals turn financial data into better decisions. Explore cash flow, budgeting, forecasting, working capital, valuation, reporting, financial modeling, and downloadable examples.
Introduction Running a business poses the threat of getting lost into the day-to-day issues the company faces. And this can mean we start to miss the bigger picture. Investing time and resources in creating a budget and a business plan is essential to ensure we form a proper long-term strategy for the business. A budget […]
The primary purpose of any business is to produce goods or provide services in a way that they have a higher value for the customers than the original cost for the firm. Companies engage in numerous activities while converting inputs to outputs. Porter’s Value Chain helps us create a clear overview of the internal organization, […]
Introduction Opportunity cost represents the benefits the business misses out on when picking between alternatives. When we have two desirable options, the benefit from the one not chosen is our opportunity cost. These costs are usually the result of bottlenecks in business processes. Therefore, finance professionals use Opportunity Cost analysis to improve the decision-making process […]
The Net Present Value (NPV) is a profitability measure we use to figure out the present value of all expected future cash flows a project or investment will generate, including the initial capital we invest. It shows us the difference between the current value of cash inflows and outflows over a period. Net Present Value […]
Introduction We perform a liquidity ratio analysis to evaluate the ability of the company to settle its obligations on time. The most common use case is when lenders and creditors want to gain a better understanding of the financial health of a borrower or customer. Analysts use the gained insights to set credit terms and […]
Introduction Investors are continually evaluating different investments, trying to identify the ones that will maximize their returns and wealth. Analysts consider the Compound Annual Growth Rate (CAGR) as one of the most accurate ways to calculate the return for any investment with a value that changes over time. CAGR represents the rate of return an […]
Introduction Most significant new projects for a business require investments in Working Capital, and this harms a company’s cash flow. Proper cash management is essential if we want the company to continue to operate in the future. A business can be profitable, but if it can’t keep cash on hand, it won’t survive. Therefore it […]
If you are already familiar with the outlined concepts, maybe you would be more interested in taking a look at the Excel model, which you can download below the article. Introduction Long-term (non-current) assets of the company have a long useful life (more than one year). When acquiring capital assets, we aim to use them […]
Introduction to the Dividend Discount Model The Dividend Discount Model (DDM) is used to estimate the price of a company’s stocks. The model is based on the theory that the present value of the stock is equal to the present value of all future dividend payments when discounted back to the present. If the present […]
Introduction The Perpetuity concept refers to the present value (PV) of equal periodic cash flows that investors will receive over an indefinite future period. We need to calculate the present value of perpetual cash flows for a variety of reasons, some being: In business and finance, perpetuity is a regular payout of the same amount […]
