BCG Equations

EBITDA

EBITDA = Net Income + Taxes + Interest + Depreciation & Amortization. Importance: Strips out financing decisions and accounting choices. Shows true operational profitability.

Working Capital

Working Capital = Current Assets - Current Liabilities. Or: Cash + AR + Inventory - Accounts Payable. Importance: Shows cash tied up in operations. High WC = liquidity risk.

% Growth Rate

% Growth = (New - Old) / Old × 100. Importance: How fast is something growing? Essential for all case math. Used to compare against targets.

Target vs Actual

Calculate target (e.g., 15% of baseline). Calculate actual (new value - old value). Compare: achieved or not? Importance: Determines if mandate is met.

EBITDA Margin

EBITDA Margin = EBITDA / Revenue. Importance: Shows % of revenue that's operational profit. Higher = better efficiency.

Net Margin

Net Margin = Net Income / Revenue. Importance: Bottom-line profitability. What % of sales becomes profit after all costs.

ROI

ROI = Profit / Investment × 100. Importance: Return on money spent. How efficiently is capital being deployed?

Market Share

Market Share = Company Sales / Total Market Sales × 100. Importance: Your competitive position. Growing share in declining market = consolidation.

Revenue Growth

Revenue Growth = (Revenue New - Revenue Old) / Revenue Old × 100. Importance: Top-line expansion. Fastest indicator of business health.

Cost Structure

Costs broken into: COGS (variable), OpEx (fixed), Overhead. Importance: Where is money being spent? Where can you cut or optimize?

Break-Even

Break-Even Point = Fixed Costs / (Price - Variable Cost per Unit). Importance: At what volume does the business become profitable?

Gross Margin

Gross Margin = (Revenue - COGS) / Revenue. Importance: Product-level profitability before operating expenses. Shows pricing power vs input costs.

Operating Leverage

How fixed costs impact profit when revenue changes. Importance: High fixed costs = high upside and downside risk. Explains profit volatility.

Cash Conversion Cycle

Time from paying for inventory to collecting cash from customers. Importance: How quickly does the business convert operations into cash? Long cycle = cash crunch.

Debt-to-Equity

Total Debt / Total Equity. Importance: How much is the company leveraged? Higher = more financial risk.

Equity Value

Enterprise Value - Net Debt

Enterprise Value

EBITDA x EBITDA Multiple