CHAPTER 4
EBIT: Earnings Before Interest & Taxes
EBITDA earnings before interest, taxes, & depreciation & amortization
Cash Flow Breakeven: Cash flow at zero for a specific period
EBDAT: earnings before depreciation, amortization, & taxes
EBDAT Breakeven: amount of revenues (survival) needed to cover cash operating expenses
“Net Cash Burn” = Cash burn – Cash build

“Net Cash Build” if Net sales – Change in receivables
Net cash flow from operations Net Income + Depreciation – Increase in receivables – Increase in inventories + Increase in payables + Increase in accrued wages
Survival breakeven: SR = VC + CFC CFC includes both fixed operating (e.g., general & administrative, & possibly marketing expenses) & fixed financing (interest) costs
SR = CFC/(1 – VCRR) Contriution margin. EBDAT HAS to be 0-
NOPAT net operating profit after taxes or EBIT x (1-tax_rate)
NOPAD BREAKEVEN TERMS NR = NOPAT/(1-VCRR) = TOFC/(1 – VCRR)
TOFC= operating fixed costs
CHAPTER 5
Three market stages: development, survival, rapid growrh
Current ratio: Average current assets / Average current liabilities
Liquid assets = venture’s cash + marketable securities + receivables
Quick Ratio = Average current assets – Average inventories Average current liabilities
NWC = current assets – current liabilities
NWC to Total Assets Ratio: = Ave. current assets – Ave. current liabilities
- Ave. total assets
Cash Conversion Cycle: inventory-to-sale conversion period + the sales-to-cash conversion period - the purchase-to-payment conversion period
I-to-S = Ave. Inventories(i0+i1/2) / (CGS / 365)
- Sale-to-Cash Conversion Period:= Ave Receivables/ (Net Sales/365)
Purchase-to-Payment Conversion Period: = Ave Payables + Ave Accrued Liabilities (COGS / 365)
Equity Multiplier = Ave total assets / ave owners’ equity
Interest