The Herfindahl-Hirschman Index (HHI) is a measure of market concentration. It is calculated by summing the squares of the market share of each firm in the market. The HHI ranges from 0 to 1, with 0 indicating perfect competition and 1 indicating a monopoly. The HHI can be used to assess whether a market is … Read more
Funds from operations (FFO) is a measure of a company’s ability to generate cash flow from its core operations. It is often used as a metric to assess the financial performance of real estate investment trusts (REITs). FFO is calculated by adding back certain non-cash items to net income, such as depreciation and amortization. This … Read more
The book-to-bill ratio is a financial ratio that measures the value of orders received by a company to the value of goods shipped and billed by the company over a specified period of time, typically one month. This ratio provides insight into a company’s near-term prospects, as a higher ratio indicates that more orders are … Read more
Exploration & Production (E&P) is a term used in the oil and gas industry to refer to the process of searching for and developing new oil and gas reserves. E&P companies are typically engaged in activities such as drilling, completion, and production of oil and gas wells. The term “E&P” is also used to refer … Read more
What is the rate of return? The rate of return (RoR) is the percentage of an investment’s profit that is generated in a given period of time. How is the rate of return calculated? The rate of return is calculated by dividing the investment’s profit by the original investment amount. What are some examples of … Read more
Net Present Value (NPV): What It Is and How to Calculate It. Why is present value important? The present value is important because it is a fundamental concept in finance that is used in numerous financial calculations. The present value is the value of an asset or liability at a specified point in time, in … Read more
Enterprise Value (EV) is a measure of a company’s total value, often used as a more comprehensive alternative to equity market capitalization. EV includes both a company’s equity market capitalization and its debt, as well as any minority interests. This measure is important because it gives a more accurate picture of a company’s true value, … Read more
The Earnings Power Value (EPV) technique is a valuation method that uses a company’s earnings power to estimate its intrinsic value. The earnings power is the amount of earnings that a company can generate from its current business model and operating environment. To calculate the EPV, the analyst first estimates the company’s earnings power and … Read more
What is return on capital invested (ROCI)? The ROCI formula is: ROCI = (net income / capital invested) x 100 An example of ROCI calculation is as follows: If a company has a net income of $1 million and a capital invested of $5 million, its ROCI would be: ROCI = ($1 million / $5 … Read more
Pretax profit margin is a financial ratio that measures a company’s profitability before taxes. The ratio is calculated by dividing a company’s pretax income by its total revenue. The pretax profit margin is a good indicator of a company’s overall profitability and its ability to generate income before taxes. What is profit margin examples? Profit … Read more
