the value of an intangible asset over time.
Intangible assets are Trademarks, R&D etc.
Amortization occurs when the value of the asset reduces over a specific
time period, usually it’s estimated useful life.
Analysis is useful in the determination of the level of
production or in a targeted desired sales mix. The analysis is for management’s
use only as the metric and calculations are often not required to be disclosed
to external sources such as investors, regulators or financial institutions.
Break-even analysis looks at the level of fixed costs relative to the profit
earned by each additional unit produced and sold.
Point (BEP) is a point in time, usually expressed in months
and/or years when profit level has equalled the fixed costs of the
Corporate Income Tax (CIT) is a tax set
by Government, typically as a percentage (%). There are a host of special tax
credits (offsets) that could reduce or even eliminate the amount of income tax
a corporation has to pay.
Current Assets are the items that
your business owns that can be converted to cash within a year, for example
cash, people that owe you money, raw materials etc.
Current Liabilities are the debts your
business will pay within a year, for example general operating expenses, items
that you bought on credit etc.
Fixed assets are depreciated over the total life of the asset, with a period
depreciation expense charged to the company's income statement, normally
monthly or annually. Accumulated depreciation is recorded on the company's
balance sheet as the summation of all depreciation expenses, and it reduces the
value of the asset over the life of that asset.
Coverage Ratio (DCSR) compares net operating income
with total debt service of the entity. Net operating income is a company's
revenue minus its operating expenses, not including taxes
and interest payments.
Before Interest and Taxes (EBIT) measures the profit a
company generates from its operations, making it synonymous with
"operating profit." By ignoring tax and interest expenses, it focuses
solely on a company's ability to generate earnings from operations, ignoring
variables such as the tax burden and capital structure.
Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA) is an indicator of a company's
Fixed Assets are items owned by
the business that have a long-term use such as property, land and equipment and
cannot be converted to cash within a year. For example vehicles, buildings,
special equipment, air-conditioners etc.
Margin Ratio represents the percent of total sales revenue that the business
retains after incurring the direct costs associated with producing the goods
and services sold by a business. The higher the percentage, the more the
business retains on its cash sales to service its other costs and obligations.
It is calculated by dividing Gross Profit by Sales.
Rate of Return (IRR) measures the profitability of the project or
business. It is defined as the rate of discount for which the net present value
of a project becomes zero.
Coverage Ratio (LLCR) is a measure of the number of times the cash
flow of a project can repay an outstanding debt over the life of a loan.
Long-term Liabilities are debts that you
don’t have to pay within a year, usually a long-term bank loan is a typical
Ratio shows how much money earned by the business is translated into
profits. It is usually expressed in percentage and is calculated by dividing
Net Profit by Sales and multiplying by 100.
Net Present Value (NPV) is the sum
of the discounted annual cash inflows net of outflows during the lifetime of
the project. The rate of discount needs to be selected. It rate of discount
reflects the financial conditions for obtaining cash and the likely return upon
alternative financial investment open to the project promoters.
Owner’s Money/Equity/Capital is the
investment that owners have put in the business plus any earnings that have
been retained in the business. It is what the owners would get if all the
assets were sold and all the obligations were paid.
Project finance is often used for long-term financing of
infrastructure and industrial projects. It is based upon the projected cash
flows of the project rather than the balance sheets of its sponsors.
Project Life Coverage
Ratio (PLCR) shows the ability of the project to cover its debt service over the life
of the project.
Investment (ROI) can be used
to assess in broad terms an investment’s profitability. Return on investment
calculates in % the profit made on an investment and divides this by the
Weighted Average Cost of Capital (WACC): Generally, a company finances its assets either
through debt or with equity. WACC is the average of the costs of these types of
financing, each of which is weighted by its proportionate use in a given
situation. By taking a weighted average in this way, we can determine how much
interest a company owes for each € it finances.
In terms of project financing, the cost of accessing the funds — includes
interest on any loans and, in the case of private equity, the return on the
capital invested. As the debts may be higher than the equity share and the
returns to the bank or investor are likely to be different, the costs of
capital is often averaged against the respective shares (weights) and terms
(e.g. interest rate and dividends), this is called the weighted average cost of