REFERENCE GUIDE
MATH FORMULAS:
Prepared and Created by the professionals at
Management Consulted
PAGE 2 INDUSTRY PRIMER: CONSUMER GOODS
PROFIT AND LOSS FORMULAS
• Revenue = Price * Volume
• Gross Profit = Revenue — Cost
• EBITDA = Net Income + Interest + Expense +
Depreciation & Amortization
• Net Profit = Gross Profit — Cost of Business Operations
and Non-Operations
• Profit Margin = Profit / Revenue
• Contribution Margin = (Revenue – Variable Costs) /
(Total Revenue)
PAGE 3
MARKET DATA FORMULAS
• Market Size = # of Target Customers * Purchases Expect-
ed in a Given Period
• Market Share = (Company’s Revenue in the Market) / (To-
tal Market Revenue)
• CAGR = [(EV / BV)^(1/n) — 1] * 100
• Growth Rate = [(New Growth Rate – Old Growth Rate) /
Old Growth Rate] * 100
• Price Elasticity of Demand = (% Change in Quantity) / (%
Change in Price)
• Conversion Ratio = (Par Value of Convertible Bond) /
(Conversion Price of Equity)
PAGE 4 INDUSTRY PRIMER: CONSUMER GOODS
OPERATIONS FORMULAS
• Amortization = P * [(i (1 + i)^n) / ((1 + i)^n – 1)]
• Depreciation = (Cost of an Asset — Residual Value) /
(Useful Life of an Asset)
• Cost Plus = Breakeven Price * Profit Margin Goal
• Breakeven (aka Payback Period) = (Initial Investment) /
(Annual Profit)
PAGE 5
M&A FORMULAS
• Synergies = NPV + P
• Cannibalization Rate = [(Lost Sales on an Old Product) /
(Sales of New Product)] * 100
• ROI = (Annual Profit) / (Initial Investment)
• Discount Rate Valuation: APV = NPV + PV of the Impact
of Financing
