Magnimetrics Library
Practical finance, Excel, valuation, and FP&A articles with downloadable working files where relevant.
Game Theory is a method of modeling the interaction between two or more players in a situation with particular rules and expected outcomes. It is helpful in many fields, but mainly as a tool in economics. Game Theory helps with the fundamental analysis of industries and the interactions between two or more companies. Theoretically, games […]
The First In First Out (FIFO) is a method for asset management that ensures assets we produce or acquire first are the ones we use or sell first. Under FIFO, we include the oldest assets’ cost in the Cost of Goods Sold (COGS) line item on the Income Statement. How does FIFO work? FIFO supports […]
Costing is an essential aspect of operations for companies that want to understand how their production absorbs costs. Only by gaining a solid understanding of the company’s cost structure can we start to control and optimize it. We can often divide the production process into specific jobs and apply the job costing method to them. […]
Job Costing is a technique from management accounting. It is a part of the internal accounting process to facilitate strategic planning and data-driven decisions. Management accounting goes down to the business’s basic units to understand profitability and help evaluate how successful management is in running the company. One of the most critical decisions for businesses […]
Lately, I’ve been working on a side project, modeling some financial statements. When I do those, I like to work with full numbers, as I get a better feel of the material items. However, when it’s time to prepare the final deliverables, I always round in thousands. What I have been doing so far is […]
Regression analysis aims to model the expected values for a dependent variable (y) based on independent variables (x). The polynomial regression is a statistical technique to fit a non-linear equation to a data set by employing polynomial functions of the independent variable. We can use the model whenever we notice a non-linear relationship between the […]
Research in the SME sector shows that around 40-50% of companies seek debt financing at least once in their life cycle. It’s essential to understand the actual cost of Debt to make informed decisions within the business. The Cost of Debt represents the effective interest rate the business pays on its debts. Generally, the ratio […]
It’s relatively easy for most businesses to analyze the day-to-day operational marketing and sales metrics like conversion rates, cost of sale, and others. However, when it comes to customer retention, it proves to be a more challenging task. Many companies struggle to define customer retention within their business model, let alone calculate and analyze it. […]
The Labor Theory of Value was one of the early attempts to explain how market prices form. It followed the idea that the main driver for goods’ value is the labor necessary to produce them. Under the theory, the labor hours it takes workers to produce a commodity is the source of its value. The […]
The term value-added represents the enhanced value a company adds to its products and services. You probably notice that products sell for more than it costs to produce them, and services charge more than it costs to render them. This is what value-added represents. The essential purpose of any business is to create value that […]
