Financial Metrics Guide
Definitions, formulas, and evaluation criteria for every metric shown in the Financial Model.
The Financial Model automatically calculates financial ratios from structured filings submitted to Japan's financial regulator, covering Income Statements, Balance Sheets, and Cash Flow Statements. Below is a comprehensive reference for each metric.
Table of Contents
Beginner's Guide: The Three Financial Statements
Every financial metric is derived from three core reports that companies publish regularly. Understanding them is the first step to reading financial data.
Income Statement (P&L)
How much did the company earn?
Records revenue and expenses over a period (usually one year). Revenue → various costs → net income. This is the data source for profitability metrics.
Balance Sheet
What does the company own and owe?
Records assets, liabilities, and equity at a point in time. Left side = assets (where money went), right side = liabilities + equity (where money came from). Source for safety and leverage metrics.
Cash Flow Statement
How did cash actually move?
Records actual cash inflows and outflows across operating, investing, and financing activities. Profit on paper doesn't always mean cash in the bank — this statement reveals the real picture.
Suggested Reading Order
Start with Profitability → Is the company making money? (Gross Margin, Operating Margin, Net Margin)
Then Cash Flow → Is the profit backed by real cash? (Operating CF, FCF)
Then Safety → Can the company survive? (Equity Ratio, Current Ratio)
Finally Efficiency & Leverage → Understand the quality and risk of growth (ROE, Asset Turnover, D/E)
Profitability
Measures how efficiently a company generates profit from its revenue. Includes margin analysis (gross, operating, net) and return-on-capital metrics (ROE, ROA).
Practical tip: Compare Gross → Operating → Net margin in sequence to see where profit is "leaking". High gross but low operating = heavy SG&A; high operating but low net = large extraordinary losses.
Gross Margin
Gross Profit ÷ Revenue × 100Unit: %The percentage of revenue retained after cost of goods sold. Indicates basic product/service profitability. Varies widely by industry: software often exceeds 60%, while retail may be 20–30%.
Gross Margin 30% = out of every $100 in revenue, $30 is gross profit. If the industry average is 40%, it may signal weak pricing or cost control.
Operating Margin
Operating Income ÷ Revenue × 100Unit: %Core business profitability including SG&A expenses. The gap between gross and operating margin reveals SG&A cost pressure.
Operating Margin 8% = after all operating expenses, $8 out of every $100 in revenue remains.
Net Margin
Net Income ÷ Revenue × 100Unit: %Final profit as a percentage of revenue, after all expenses, taxes, and extraordinary items. Can be volatile due to one-off gains/losses; compare with operating margin for a clearer picture.
Net Margin 5% = $5 of net profit per $100 of revenue. If operating margin is ~10% but net margin is only 3%, extraordinary losses or tax burden are heavy.
ROE (Return on Equity)
Net Income ÷ Net Assets (Equity) × 100Unit: %Return generated for shareholders. Can be decomposed via DuPont analysis into margin × turnover × leverage. Japan's Ito Report recommends 8% as a minimum target.
ROE 12% = for every $100 of equity, the company generates $12 in profit. However, if driven by heavy borrowing, the risk is also higher — check Equity Ratio and D/E.
ROA (Return on Assets)
Net Income ÷ Total Assets × 100Unit: %Measures how efficiently total assets generate profit. Unlike ROE, it is unaffected by financial leverage, making it better suited for cross-company comparison.
ROA 6% = $6 of profit per $100 of assets. If Company A has ROE 15% but ROA 3%, the high return is primarily leverage-driven.
ROIC (Return on Invested Capital)
Operating Income × (1 − Effective Tax Rate) ÷ (Equity + Interest-Bearing Debt) × 100Unit: %Return generated per unit of invested capital (equity + interest-bearing debt). Less distorted by leverage than ROE, this is the cleanest measure of operating capital efficiency. Value is created only when ROIC exceeds the cost of capital (WACC).
ROIC 10% with WACC 5% means 5 yen of value created per 100 yen of invested capital.
| Metric | Formula | Unit | Description |
|---|---|---|---|
| Gross Margin | Gross Profit ÷ Revenue × 100 | % | The percentage of revenue retained after cost of goods sold. Indicates basic product/service profitability. Varies widely by industry: software often exceeds 60%, while retail may be 20–30%. Gross Margin 30% = out of every $100 in revenue, $30 is gross profit. If the industry average is 40%, it may signal weak pricing or cost control. |
| Operating Margin | Operating Income ÷ Revenue × 100 | % | Core business profitability including SG&A expenses. The gap between gross and operating margin reveals SG&A cost pressure. Operating Margin 8% = after all operating expenses, $8 out of every $100 in revenue remains. |
| Net Margin | Net Income ÷ Revenue × 100 | % | Final profit as a percentage of revenue, after all expenses, taxes, and extraordinary items. Can be volatile due to one-off gains/losses; compare with operating margin for a clearer picture. Net Margin 5% = $5 of net profit per $100 of revenue. If operating margin is ~10% but net margin is only 3%, extraordinary losses or tax burden are heavy. |
| ROE (Return on Equity) | Net Income ÷ Net Assets (Equity) × 100 | % | Return generated for shareholders. Can be decomposed via DuPont analysis into margin × turnover × leverage. Japan's Ito Report recommends 8% as a minimum target. ROE 12% = for every $100 of equity, the company generates $12 in profit. However, if driven by heavy borrowing, the risk is also higher — check Equity Ratio and D/E. |
| ROA (Return on Assets) | Net Income ÷ Total Assets × 100 | % | Measures how efficiently total assets generate profit. Unlike ROE, it is unaffected by financial leverage, making it better suited for cross-company comparison. ROA 6% = $6 of profit per $100 of assets. If Company A has ROE 15% but ROA 3%, the high return is primarily leverage-driven. |
| ROIC (Return on Invested Capital) | Operating Income × (1 − Effective Tax Rate) ÷ (Equity + Interest-Bearing Debt) × 100 | % | Return generated per unit of invested capital (equity + interest-bearing debt). Less distorted by leverage than ROE, this is the cleanest measure of operating capital efficiency. Value is created only when ROIC exceeds the cost of capital (WACC). ROIC 10% with WACC 5% means 5 yen of value created per 100 yen of invested capital. |
Liquidity
Measures a company's ability to meet short-term obligations and financial stability.
These metrics answer one core question: "Could this company suddenly go bankrupt?" Even with healthy profits, insufficient cash to cover short-term debt can mean insolvency.
Current Ratio
Current Assets ÷ Current Liabilities × 100Unit: %Short-term debt coverage. A ratio above 200% is generally considered ideal, but manufacturing tends higher and retail lower — industry context matters.
Current Ratio 150% = for every $100 of short-term debt, there are $150 of current assets. Below 100% means current assets can't cover short-term obligations.
Equity Ratio
Net Assets (Equity) ÷ Total Assets × 100Unit: %Proportion of total assets funded by equity. Indicates financial stability.
Equity Ratio 60% = 60% of total assets are funded by equity, 40% by debt. Generally 40%+ is considered safe.
Cash Ratio
Cash & Equivalents ÷ Current Liabilities × 100Unit: %Ability to cover short-term debt with immediately available cash. A stricter liquidity measure than the current ratio.
Cash Ratio 50% = cash alone can cover half of short-term debt. Particularly important for companies with volatile cash flows.
| Metric | Formula | Unit | Description |
|---|---|---|---|
| Current Ratio | Current Assets ÷ Current Liabilities × 100 | % | Short-term debt coverage. A ratio above 200% is generally considered ideal, but manufacturing tends higher and retail lower — industry context matters. Current Ratio 150% = for every $100 of short-term debt, there are $150 of current assets. Below 100% means current assets can't cover short-term obligations. |
| Equity Ratio | Net Assets (Equity) ÷ Total Assets × 100 | % | Proportion of total assets funded by equity. Indicates financial stability. Equity Ratio 60% = 60% of total assets are funded by equity, 40% by debt. Generally 40%+ is considered safe. |
| Cash Ratio | Cash & Equivalents ÷ Current Liabilities × 100 | % | Ability to cover short-term debt with immediately available cash. A stricter liquidity measure than the current ratio. Cash Ratio 50% = cash alone can cover half of short-term debt. Particularly important for companies with volatile cash flows. |
Leverage
Measures the degree of debt utilization and associated financial risk.
Leverage isn't inherently bad — moderate debt can boost ROE. But excessive leverage amplifies downside risk. The key question is whether the company generates enough stable cash flow to service its debt.
Debt/Equity Ratio
Total Liabilities ÷ Net Assets (Equity)Unit: ×Ratio of debt to equity. Below 1× is generally considered healthy.
D/E 0.8× = for every $100 of equity, there's $80 of debt. Over 2× means debt is more than double equity — a warning sign.
Debt Ratio
Total Liabilities ÷ Total Assets × 100Unit: %Proportion of assets financed by debt. Complements the equity ratio. Below 50% is generally considered sound, but capital-intensive sectors (real estate, utilities) typically run higher.
Debt Ratio 45% = 45% of total assets are financed by debt. Note: Equity Ratio + Debt Ratio ≈ 100% — they're complementary.
Interest-Bearing Debt / Equity
Interest-Bearing Debt ÷ EquityUnit: ×Leverage focused on financing debt only (borrowings, bonds, lease liabilities), excluding operating liabilities. Useful for debt-capital-structure diagnostics in DD and credit review.
Interest Coverage Ratio
Operating Income ÷ |Interest Expense|Unit: timesHow many times operating profit covers interest payments. Higher values indicate comfortable debt service; below 1× means operating profit alone cannot cover interest, signaling default risk.
ICR 8× = operating profit is 8 times interest expense. At 1.5×, a downturn could make interest payments unmanageable.
| Metric | Formula | Unit | Description |
|---|---|---|---|
| Debt/Equity Ratio | Total Liabilities ÷ Net Assets (Equity) | × | Ratio of debt to equity. Below 1× is generally considered healthy. D/E 0.8× = for every $100 of equity, there's $80 of debt. Over 2× means debt is more than double equity — a warning sign. |
| Debt Ratio | Total Liabilities ÷ Total Assets × 100 | % | Proportion of assets financed by debt. Complements the equity ratio. Below 50% is generally considered sound, but capital-intensive sectors (real estate, utilities) typically run higher. Debt Ratio 45% = 45% of total assets are financed by debt. Note: Equity Ratio + Debt Ratio ≈ 100% — they're complementary. |
| Interest-Bearing Debt / Equity | Interest-Bearing Debt ÷ Equity | × | Leverage focused on financing debt only (borrowings, bonds, lease liabilities), excluding operating liabilities. Useful for debt-capital-structure diagnostics in DD and credit review. |
| Interest Coverage Ratio | Operating Income ÷ |Interest Expense| | times | How many times operating profit covers interest payments. Higher values indicate comfortable debt service; below 1× means operating profit alone cannot cover interest, signaling default risk. ICR 8× = operating profit is 8 times interest expense. At 1.5×, a downturn could make interest payments unmanageable. |
Efficiency
Measures how effectively a company uses its assets to generate revenue.
Efficiency is the second leg of DuPont analysis. High ROE can come from high margins, high turnover, or high leverage. These metrics help you tell which.
Asset Turnover
Revenue ÷ Total AssetsUnit: ×Asset utilization efficiency. Above 1× indicates assets are being turned over efficiently. Retail/wholesale tends higher; asset-heavy industries (real estate, utilities) tend lower.
Turnover 1.2× = $120 of revenue per $100 of assets. Convenience stores may hit 3×, utilities 0.3× — always compare within the same industry.
SGA Ratio
SGA Expenses ÷ Revenue × 100Unit: %Selling, General & Administrative expenses as a percentage of revenue. Lower is more cost-efficient.
SGA Ratio 25% = $25 of every $100 in revenue goes to selling & admin costs. If gross margin is 30% but SGA is 28%, there's very little room for operating profit.
| Metric | Formula | Unit | Description |
|---|---|---|---|
| Asset Turnover | Revenue ÷ Total Assets | × | Asset utilization efficiency. Above 1× indicates assets are being turned over efficiently. Retail/wholesale tends higher; asset-heavy industries (real estate, utilities) tend lower. Turnover 1.2× = $120 of revenue per $100 of assets. Convenience stores may hit 3×, utilities 0.3× — always compare within the same industry. |
| SGA Ratio | SGA Expenses ÷ Revenue × 100 | % | Selling, General & Administrative expenses as a percentage of revenue. Lower is more cost-efficient. SGA Ratio 25% = $25 of every $100 in revenue goes to selling & admin costs. If gross margin is 30% but SGA is 28%, there's very little room for operating profit. |
Cash Flow
Tracks real cash movements, as distinct from accrual-based profit.
Key beginner insight: Profit on the income statement ≠ actual cash. A company can show accounting profits while cash is declining (uncollected receivables, inventory buildup, etc.). The cash flow statement shows where the real money goes.
Operating CF
Net cash from operating activities (directly from CF statement)Unit: AmountCash generated by core operations. Should be positive.
Operating CF > 0 = core business is generating cash. If net income is $1B but operating CF is only $200M, profit quality is questionable.
Investing CF
Net cash from investing activities (directly from CF statement)Unit: AmountCash spent on capital expenditure. Typically negative (investing in growth).
Investing CF < 0 = normal (investing in growth). If it suddenly turns positive, the company may be selling assets — a red flag.
Financing CF
Net cash from financing activities (directly from CF statement)Unit: AmountCash flows from borrowing, repayment, and dividends.
Consistently negative Financing CF = steady repayment/dividends (typical for mature companies). Consistently positive = increasing borrowing — check leverage metrics.
Free Cash Flow (FCF)
Operating CF + Investing CFUnit: AmountCash available after operations and investment. Positive FCF means the company has surplus to pay dividends, reduce debt, or invest further — a core measure of intrinsic value.
Consistently positive FCF = strong cash generation ability. If net income is healthy but FCF is chronically negative, it may indicate inventory or receivables problems.
Operating CF Margin
Operating CF ÷ Revenue × 100Unit: %Cash conversion efficiency of revenue. More manipulation-resistant than net margin.
OCF Margin 15% = $15 of actual cash per $100 of revenue. If net margin is 10% but OCF margin is 15%, cash income quality is high.
| Metric | Formula | Unit | Description |
|---|---|---|---|
| Operating CF | Net cash from operating activities (directly from CF statement) | Amount | Cash generated by core operations. Should be positive. Operating CF > 0 = core business is generating cash. If net income is $1B but operating CF is only $200M, profit quality is questionable. |
| Investing CF | Net cash from investing activities (directly from CF statement) | Amount | Cash spent on capital expenditure. Typically negative (investing in growth). Investing CF < 0 = normal (investing in growth). If it suddenly turns positive, the company may be selling assets — a red flag. |
| Financing CF | Net cash from financing activities (directly from CF statement) | Amount | Cash flows from borrowing, repayment, and dividends. Consistently negative Financing CF = steady repayment/dividends (typical for mature companies). Consistently positive = increasing borrowing — check leverage metrics. |
| Free Cash Flow (FCF) | Operating CF + Investing CF | Amount | Cash available after operations and investment. Positive FCF means the company has surplus to pay dividends, reduce debt, or invest further — a core measure of intrinsic value. Consistently positive FCF = strong cash generation ability. If net income is healthy but FCF is chronically negative, it may indicate inventory or receivables problems. |
| Operating CF Margin | Operating CF ÷ Revenue × 100 | % | Cash conversion efficiency of revenue. More manipulation-resistant than net margin. OCF Margin 15% = $15 of actual cash per $100 of revenue. If net margin is 10% but OCF margin is 15%, cash income quality is high. |
DD Metrics (Due Diligence)
Synthetic indicators commonly used in M&A due diligence, combining data from PL, BS, and CF statements.
These are the go-to metrics for investment bankers and PE analysts. If you're valuing a company — "how much is it worth?" — focus on EBITDA and Net Debt/EBITDA.
EBITDA
Operating Income + |Depreciation & Amortization|Unit: AmountEarnings before interest, taxes, depreciation, and amortization. Strips out differences in capital structure, tax regimes, and depreciation policies, making it ideal for cross-border and cross-industry comparisons. Widely used as an enterprise-value basis in M&A.
EBITDA of $5B represents the "productive capacity of the business machine." EV/EBITDA (enterprise value multiple) is commonly used to compare "prices" across companies.
EBITDA Margin
EBITDA ÷ Revenue × 100Unit: %EBITDA as a percentage of revenue. Used for international profitability benchmarking.
EBITDA Margin 20% = $20 of EBITDA per $100 of revenue. Higher than operating margin because depreciation is added back.
Adjusted EBITDA
EBITDA − Extraordinary Income + |Extraordinary Loss|Unit: AmountNormalizes EBITDA by removing one-off gains/losses to approximate recurring operating earning power.
Adjusted EBITDA Margin
Adjusted EBITDA ÷ Revenue × 100Unit: %Recurring cash-profitability margin after excluding non-recurring extraordinary items.
EBITDA YoY Growth
(EBITDA_t − EBITDA_{t-1}) ÷ |EBITDA_{t-1}| × 100Unit: %Year-over-year growth of EBITDA, used to track expansion or contraction in core earning capacity.
Working Capital
Current Assets − Current LiabilitiesUnit: AmountShort-term funds available for daily operations. Positive indicates comfortable liquidity.
Working Capital $2B = after covering short-term liabilities, $2B remains for daily operations. Negative means short-term cash is tight.
Working Capital / Revenue
Working Capital ÷ Revenue × 100Unit: %How much net operating funding is tied up relative to sales; higher values imply more balance-sheet intensity.
Net Debt
Interest-bearing Debt − Cash & EquivalentsUnit: AmountEffective debt level. Negative means cash exceeds debt (effectively debt-free).
Net Debt -$3B = cash exceeds debt by $3B — effectively debt-free. Such companies are more resilient in downturns.
Net Debt / EBITDA
Net Debt ÷ EBITDAUnit: ×Debt repayment capacity. Below 2× is ideal — indicates how many years of EBITDA are needed to repay net debt.
Net Debt/EBITDA 1.5× = 1.5 years of EBITDA can repay all net debt. Over 4× is generally considered high risk.
FCF Margin
FCF ÷ Revenue × 100Unit: %Share of revenue that converts to free cash available to owners and creditors.
Capex / Revenue
|Capex| ÷ Revenue × 100Unit: %Investment intensity relative to sales. Higher ratios imply heavier reinvestment requirements.
Capex / D&A
|Capex| ÷ |Depreciation & Amortization|Unit: ×Maintenance-vs-growth investment signal. >1× often indicates expansion capex; <1× can indicate underinvestment.
Effective Tax Rate
Income Tax ÷ Pretax Income × 100Unit: %Observed tax burden on earnings before tax. Large swings may reflect one-offs, tax credits, or jurisdiction mix changes.
Extraordinary Items / Ordinary Income
(Extraordinary Income − |Extraordinary Loss|) ÷ |Ordinary Income| × 100Unit: %Dependence on non-recurring gains/losses relative to core ordinary earnings.
Quick Ratio
(Current Assets − Inventory) ÷ Current LiabilitiesUnit: ×Stricter immediate liquidity test that excludes inventory from near-cash resources.
Operating Income YoY (DD)
(Operating Income_t − Operating Income_{t-1}) ÷ |Operating Income_{t-1}| × 100Unit: %Tracks whether operating earnings are scaling faster or slower than sales.
Net Income YoY (DD)
(Net Income_t − Net Income_{t-1}) ÷ |Net Income_{t-1}| × 100Unit: %Bottom-line growth check after interest, tax, and extraordinary effects.
Revenue CAGR (DD)
(Revenue_latest ÷ Revenue_earliest)^(1/n) − 1Unit: %Multi-period annualized growth rate that smooths one-year volatility.
Operating Income CAGR (DD)
(Operating Income_latest ÷ Operating Income_earliest)^(1/n) − 1Unit: %Annualized operating-profit growth over a multi-year window.
Goodwill / Total Assets
Goodwill ÷ Total Assets × 100Unit: %Acquisition-premium exposure in the balance sheet; high levels increase impairment sensitivity.
Intangibles / Equity
Intangible Assets ÷ Equity × 100Unit: %How much of book equity is backed by intangible assets, a key balance-sheet quality check.
Days Sales Outstanding (DSO)
Accounts Receivable ÷ Revenue × 365Unit: daysAverage days to collect receivables. Rising DSO can signal weaker collection discipline or channel pressure.
Trade Receivables
Reported Trade Receivables (BS value)Unit: AmountGross receivable balance used as the base for DSO and receivable-intensity checks.
Trade Receivables / Revenue
Trade Receivables ÷ Revenue × 100Unit: %Receivables intensity vs sales. Persistent elevation may indicate extended credit terms or slower collection quality.
Trade Receivables / Total Assets
Trade Receivables ÷ Total Assets × 100Unit: %Balance-sheet concentration of receivables used to gauge exposure to customer-credit risk.
Trade Payables
Reported Trade Payables (BS value)Unit: AmountSupplier payable balance used as the base for DPO and supplier-financing dependence analysis.
Trade Payables / Revenue
Trade Payables ÷ Revenue × 100Unit: %Payables load relative to sales. Rising values can reflect stronger supplier financing or stretched payment cycles.
Inventories
Reported Inventory (BS value)Unit: AmountAbsolute inventory level used for DIO, inventory intensity, and stock build-up diagnostics.
Inventory / Revenue
Inventory ÷ Revenue × 100Unit: %Inventory intensity versus sales. Upward drift can indicate slower sell-through or demand forecasting mismatch.
Inventory Turnover
COGS ÷ InventoryUnit: ×How many times inventory rotates through cost of sales in a period. Lower turnover usually indicates slower movement and higher obsolescence risk.
Days Payables Outstanding (DPO)
|Accounts Payable| ÷ |COGS| × 365Unit: daysAverage supplier-payment days. Longer DPO boosts short-term cash but may indicate payment stretch risk.
Days Inventory Outstanding (DIO)
Inventory ÷ |COGS| × 365Unit: daysAverage inventory holding period. Increasing DIO can indicate slowing sell-through or weaker demand quality.
| Metric | Formula | Unit | Description |
|---|---|---|---|
| EBITDA | Operating Income + |Depreciation & Amortization| | Amount | Earnings before interest, taxes, depreciation, and amortization. Strips out differences in capital structure, tax regimes, and depreciation policies, making it ideal for cross-border and cross-industry comparisons. Widely used as an enterprise-value basis in M&A. EBITDA of $5B represents the "productive capacity of the business machine." EV/EBITDA (enterprise value multiple) is commonly used to compare "prices" across companies. |
| EBITDA Margin | EBITDA ÷ Revenue × 100 | % | EBITDA as a percentage of revenue. Used for international profitability benchmarking. EBITDA Margin 20% = $20 of EBITDA per $100 of revenue. Higher than operating margin because depreciation is added back. |
| Adjusted EBITDA | EBITDA − Extraordinary Income + |Extraordinary Loss| | Amount | Normalizes EBITDA by removing one-off gains/losses to approximate recurring operating earning power. |
| Adjusted EBITDA Margin | Adjusted EBITDA ÷ Revenue × 100 | % | Recurring cash-profitability margin after excluding non-recurring extraordinary items. |
| EBITDA YoY Growth | (EBITDA_t − EBITDA_{t-1}) ÷ |EBITDA_{t-1}| × 100 | % | Year-over-year growth of EBITDA, used to track expansion or contraction in core earning capacity. |
| Working Capital | Current Assets − Current Liabilities | Amount | Short-term funds available for daily operations. Positive indicates comfortable liquidity. Working Capital $2B = after covering short-term liabilities, $2B remains for daily operations. Negative means short-term cash is tight. |
| Working Capital / Revenue | Working Capital ÷ Revenue × 100 | % | How much net operating funding is tied up relative to sales; higher values imply more balance-sheet intensity. |
| Net Debt | Interest-bearing Debt − Cash & Equivalents | Amount | Effective debt level. Negative means cash exceeds debt (effectively debt-free). Net Debt -$3B = cash exceeds debt by $3B — effectively debt-free. Such companies are more resilient in downturns. |
| Net Debt / EBITDA | Net Debt ÷ EBITDA | × | Debt repayment capacity. Below 2× is ideal — indicates how many years of EBITDA are needed to repay net debt. Net Debt/EBITDA 1.5× = 1.5 years of EBITDA can repay all net debt. Over 4× is generally considered high risk. |
| FCF Margin | FCF ÷ Revenue × 100 | % | Share of revenue that converts to free cash available to owners and creditors. |
| Capex / Revenue | |Capex| ÷ Revenue × 100 | % | Investment intensity relative to sales. Higher ratios imply heavier reinvestment requirements. |
| Capex / D&A | |Capex| ÷ |Depreciation & Amortization| | × | Maintenance-vs-growth investment signal. >1× often indicates expansion capex; <1× can indicate underinvestment. |
| Effective Tax Rate | Income Tax ÷ Pretax Income × 100 | % | Observed tax burden on earnings before tax. Large swings may reflect one-offs, tax credits, or jurisdiction mix changes. |
| Extraordinary Items / Ordinary Income | (Extraordinary Income − |Extraordinary Loss|) ÷ |Ordinary Income| × 100 | % | Dependence on non-recurring gains/losses relative to core ordinary earnings. |
| Quick Ratio | (Current Assets − Inventory) ÷ Current Liabilities | × | Stricter immediate liquidity test that excludes inventory from near-cash resources. |
| Operating Income YoY (DD) | (Operating Income_t − Operating Income_{t-1}) ÷ |Operating Income_{t-1}| × 100 | % | Tracks whether operating earnings are scaling faster or slower than sales. |
| Net Income YoY (DD) | (Net Income_t − Net Income_{t-1}) ÷ |Net Income_{t-1}| × 100 | % | Bottom-line growth check after interest, tax, and extraordinary effects. |
| Revenue CAGR (DD) | (Revenue_latest ÷ Revenue_earliest)^(1/n) − 1 | % | Multi-period annualized growth rate that smooths one-year volatility. |
| Operating Income CAGR (DD) | (Operating Income_latest ÷ Operating Income_earliest)^(1/n) − 1 | % | Annualized operating-profit growth over a multi-year window. |
| Goodwill / Total Assets | Goodwill ÷ Total Assets × 100 | % | Acquisition-premium exposure in the balance sheet; high levels increase impairment sensitivity. |
| Intangibles / Equity | Intangible Assets ÷ Equity × 100 | % | How much of book equity is backed by intangible assets, a key balance-sheet quality check. |
| Days Sales Outstanding (DSO) | Accounts Receivable ÷ Revenue × 365 | days | Average days to collect receivables. Rising DSO can signal weaker collection discipline or channel pressure. |
| Trade Receivables | Reported Trade Receivables (BS value) | Amount | Gross receivable balance used as the base for DSO and receivable-intensity checks. |
| Trade Receivables / Revenue | Trade Receivables ÷ Revenue × 100 | % | Receivables intensity vs sales. Persistent elevation may indicate extended credit terms or slower collection quality. |
| Trade Receivables / Total Assets | Trade Receivables ÷ Total Assets × 100 | % | Balance-sheet concentration of receivables used to gauge exposure to customer-credit risk. |
| Trade Payables | Reported Trade Payables (BS value) | Amount | Supplier payable balance used as the base for DPO and supplier-financing dependence analysis. |
| Trade Payables / Revenue | Trade Payables ÷ Revenue × 100 | % | Payables load relative to sales. Rising values can reflect stronger supplier financing or stretched payment cycles. |
| Inventories | Reported Inventory (BS value) | Amount | Absolute inventory level used for DIO, inventory intensity, and stock build-up diagnostics. |
| Inventory / Revenue | Inventory ÷ Revenue × 100 | % | Inventory intensity versus sales. Upward drift can indicate slower sell-through or demand forecasting mismatch. |
| Inventory Turnover | COGS ÷ Inventory | × | How many times inventory rotates through cost of sales in a period. Lower turnover usually indicates slower movement and higher obsolescence risk. |
| Days Payables Outstanding (DPO) | |Accounts Payable| ÷ |COGS| × 365 | days | Average supplier-payment days. Longer DPO boosts short-term cash but may indicate payment stretch risk. |
| Days Inventory Outstanding (DIO) | Inventory ÷ |COGS| × 365 | days | Average inventory holding period. Increasing DIO can indicate slowing sell-through or weaker demand quality. |
Growth
Metrics tracking how revenue and cash flow change over time. They gain meaning when compared to business stage and industry averages.
Look at 3–5 year trends, not single-year numbers. One-off demand spikes and M&A-driven growth often lack durability — separate organic growth from total growth.
Revenue Growth (YoY)
(Revenue_current − Revenue_prior) ÷ |Revenue_prior| × 100Unit: %Year-over-year revenue comparison. Evaluate alongside market growth and profit growth to distinguish share gains from broad market expansion.
Revenue growth 8% = prior 10B → current 10.8B. If the market grew 2%, the company gained share.
| Metric | Formula | Unit | Description |
|---|---|---|---|
| Revenue Growth (YoY) | (Revenue_current − Revenue_prior) ÷ |Revenue_prior| × 100 | % | Year-over-year revenue comparison. Evaluate alongside market growth and profit growth to distinguish share gains from broad market expansion. Revenue growth 8% = prior 10B → current 10.8B. If the market grew 2%, the company gained share. |
Quality of Earnings
Diagnostics that test whether reported earnings are backed by cash and free of one-off distortions. Heavily used in M&A due diligence and investment analysis.
Reported earnings include accounting estimates and can be managed. QoE metrics cross-check the cash flow statement against the P&L to verify that accounting profit is real cash.
CFO / Operating Income
Operating Cash Flow ÷ Operating IncomeUnit: xShare of operating income converted to cash. ≥0.95x is healthy; ≤0.65x signals that profit is trapped in receivables or inventory and not yet collected.
CFO/OI 0.5x means only half of operating profit is in cash. Sustained, this risks working-capital depletion.
CFO / Net Income
Operating Cash Flow ÷ Net IncomeUnit: xWhether bottom-line profit is backed by cash. ≥1.0x sustained is ideal; persistent shortfalls warrant suspicion of earnings management.
Sloan Accruals Ratio
(Net Income − Operating Cash Flow) ÷ Average Total AssetsUnit: ratioSize of non-cash (accrual) earnings relative to assets. ≤0.03 healthy; ≥0.09 elevated. Sloan (1996) showed high-accrual firms underperform the following period.
Extraordinary Items Impact
|Extraordinary Gains − Losses| ÷ |Operating Income| × 100Unit: %How much one-off items move the bottom line. Above 25%, re-evaluate the company using operating profit excluding extraordinary items.
Cash Conversion Cycle (CCC)
DSO + DIO − DPO (days sales outstanding + days inventory − days payable)Unit: daysDays from buying inventory to collecting cash. Shorter is better; lengthening signals collection delays or inventory bloat. Best read against peers.
CCC 60 days = it takes two months to convert inventory to cash. A peer at 30 days runs a more efficient working-capital cycle.
Margin Stability
Standard deviation of gross (or operating) margin over the last 3 periodsUnit: ppSmaller is more stable. Higher volatility suggests cost swings, pricing pressure, or accounting policy changes.
Effective Tax Rate Stability
Standard deviation of (Income Tax ÷ Pretax Income) over the last 3 periodsUnit: ppUnusual variability points to tax-regime changes, deferred-tax-asset reversals, or shifting geographic profit mix. Can flag ongoing tax planning.
Working Capital Growth vs Revenue Growth
Working Capital growth rate ÷ Revenue growth rateUnit: xChecks whether working capital (AR + inventory) is outpacing sales. Above 1.5x raises concerns of channel stuffing or inventory build-up.
| Metric | Formula | Unit | Description |
|---|---|---|---|
| CFO / Operating Income | Operating Cash Flow ÷ Operating Income | x | Share of operating income converted to cash. ≥0.95x is healthy; ≤0.65x signals that profit is trapped in receivables or inventory and not yet collected. CFO/OI 0.5x means only half of operating profit is in cash. Sustained, this risks working-capital depletion. |
| CFO / Net Income | Operating Cash Flow ÷ Net Income | x | Whether bottom-line profit is backed by cash. ≥1.0x sustained is ideal; persistent shortfalls warrant suspicion of earnings management. |
| Sloan Accruals Ratio | (Net Income − Operating Cash Flow) ÷ Average Total Assets | ratio | Size of non-cash (accrual) earnings relative to assets. ≤0.03 healthy; ≥0.09 elevated. Sloan (1996) showed high-accrual firms underperform the following period. |
| Extraordinary Items Impact | |Extraordinary Gains − Losses| ÷ |Operating Income| × 100 | % | How much one-off items move the bottom line. Above 25%, re-evaluate the company using operating profit excluding extraordinary items. |
| Cash Conversion Cycle (CCC) | DSO + DIO − DPO (days sales outstanding + days inventory − days payable) | days | Days from buying inventory to collecting cash. Shorter is better; lengthening signals collection delays or inventory bloat. Best read against peers. CCC 60 days = it takes two months to convert inventory to cash. A peer at 30 days runs a more efficient working-capital cycle. |
| Margin Stability | Standard deviation of gross (or operating) margin over the last 3 periods | pp | Smaller is more stable. Higher volatility suggests cost swings, pricing pressure, or accounting policy changes. |
| Effective Tax Rate Stability | Standard deviation of (Income Tax ÷ Pretax Income) over the last 3 periods | pp | Unusual variability points to tax-regime changes, deferred-tax-asset reversals, or shifting geographic profit mix. Can flag ongoing tax planning. |
| Working Capital Growth vs Revenue Growth | Working Capital growth rate ÷ Revenue growth rate | x | Checks whether working capital (AR + inventory) is outpacing sales. Above 1.5x raises concerns of channel stuffing or inventory build-up. |
Forensic Scores
Statistically-derived composite scores for bankruptcy risk and earnings manipulation. By combining multiple ratios into a single number, they can flag patterns missed by individual metrics.
Scores are warning signals, not verdicts. A threshold breach should trigger additional due diligence to identify the underlying cause.
Altman Z'-Score (bankruptcy prediction)
Z' = 0.717·X1 + 0.847·X2 + 3.107·X3 + 0.42·X4 + 0.998·X5Unit: scoreBankruptcy-risk score for manufacturing firms. Bands: > 2.90 safe, 1.23–2.90 grey, < 1.23 distress. Non-manufacturers use Z'' (drops X5 and recalibrates coefficients). X1 = Working Capital ÷ Total Assets (short-term liquidity) X2 = Retained Earnings ÷ Total Assets (long-term profitability) X3 = EBIT ÷ Total Assets (earning power) X4 = Equity ÷ Total Liabilities (solvency) X5 = Revenue ÷ Total Assets (asset turnover, manufacturing only)
Beneish M-Score (manipulation detection)
M = −4.84 + 0.92·DSRI + 0.528·GMI + 0.404·AQI + 0.892·SGI + 0.115·DEPI − 0.172·SGAI + 4.679·TATA − 0.327·LVGIUnit: scoreM > −1.78 classifies a firm as a likely manipulator (Beneish 1999). The eight sub-indices are year-over-year ratios: DSRI (Receivables) = (AR/Sales)_current ÷ (AR/Sales)_prior GMI (Gross Margin) = GM_prior ÷ GM_current AQI (Asset Quality) = year-over-year ratio of intangible/other assets to total assets SGI (Sales Growth) = Sales_current ÷ Sales_prior DEPI (Depreciation) = Depreciation rate_prior ÷ rate_current SGAI (SG&A) = (SGA/Sales)_current ÷ (SGA/Sales)_prior LVGI (Leverage) = Debt ratio_current ÷ Debt ratio_prior TATA (Accruals) = non-cash working-capital change ÷ Total Assets
Dechow F-Score (misstatement probability)
F = −7.893 + 0.79·RSST_ACC + 2.518·CH_REC + 1.191·CH_INV + 1.979·SOFT_ASSETS + 0.171·CH_CS − 0.932·CH_ROA + 1.029·ISSUEUnit: scoreA logistic model from Dechow et al. (2011) that estimates the probability of material misstatement rather than bankruptcy risk. Typical rule of thumb: F < 0.85 normal, 0.85–1.85 elevated, > 1.85 high risk. Core drivers include accrual intensity, receivable/inventory expansion, soft-asset mix, and financing pressure.
Springate S-Score (distress screening)
S = 1.03·(Working Capital/Total Assets) + 3.07·(EBIT/Total Assets) + 0.66·(EBIT/Current Liabilities) + 0.40·(Revenue/Total Assets)Unit: scoreFour-factor discriminant score originally calibrated on Canadian firms (Springate, 1978). A common interpretation is: S ≥ 0.862 safe, 0 to 0.862 grey zone, and < 0 distress risk. Because coefficients are sample-specific, use it as an early warning signal and always validate with industry context.
Ohlson O-Score (default probability)
O = −1.32 − 0.407·log(TA) + 6.03·(TL/TA) − 1.43·(WC/TA) + 0.0757·(CL/CA) − 1.72·OENEG − 2.37·(NI/TA) − 1.83·(FFO/TL) + 0.285·INTWO − 0.521·CHINUnit: scoreNine-variable logistic default model (Ohlson, 1980). Convert O-score to probability with logistic transform and read it as a one-year distress likelihood. Leverage (TL/TA), liquidity (WC/TA, CL/CA), profitability (NI/TA), and persistent losses (INTWO) are the main contributors.
Benford MAD (digit-distribution test)
MAD = (1/9) Σ|Observed_d − log10(1 + 1/d)|, d ∈ {1..9}Unit: MADMeasures how far first-digit frequencies deviate from Benford's expected distribution. Lower MAD means closer conformity. A practical benchmark is: <0.006 close fit, <0.012 acceptable, <0.015 marginal, and ≥0.015 non-conformity. This is a screening test for anomalies, not standalone proof of fraud.
| Metric | Formula | Unit | Description |
|---|---|---|---|
| Altman Z'-Score (bankruptcy prediction) | Z' = 0.717·X1 + 0.847·X2 + 3.107·X3 + 0.42·X4 + 0.998·X5 | score | Bankruptcy-risk score for manufacturing firms. Bands: > 2.90 safe, 1.23–2.90 grey, < 1.23 distress. Non-manufacturers use Z'' (drops X5 and recalibrates coefficients). X1 = Working Capital ÷ Total Assets (short-term liquidity) X2 = Retained Earnings ÷ Total Assets (long-term profitability) X3 = EBIT ÷ Total Assets (earning power) X4 = Equity ÷ Total Liabilities (solvency) X5 = Revenue ÷ Total Assets (asset turnover, manufacturing only) |
| Beneish M-Score (manipulation detection) | M = −4.84 + 0.92·DSRI + 0.528·GMI + 0.404·AQI + 0.892·SGI + 0.115·DEPI − 0.172·SGAI + 4.679·TATA − 0.327·LVGI | score | M > −1.78 classifies a firm as a likely manipulator (Beneish 1999). The eight sub-indices are year-over-year ratios: DSRI (Receivables) = (AR/Sales)_current ÷ (AR/Sales)_prior GMI (Gross Margin) = GM_prior ÷ GM_current AQI (Asset Quality) = year-over-year ratio of intangible/other assets to total assets SGI (Sales Growth) = Sales_current ÷ Sales_prior DEPI (Depreciation) = Depreciation rate_prior ÷ rate_current SGAI (SG&A) = (SGA/Sales)_current ÷ (SGA/Sales)_prior LVGI (Leverage) = Debt ratio_current ÷ Debt ratio_prior TATA (Accruals) = non-cash working-capital change ÷ Total Assets |
| Dechow F-Score (misstatement probability) | F = −7.893 + 0.79·RSST_ACC + 2.518·CH_REC + 1.191·CH_INV + 1.979·SOFT_ASSETS + 0.171·CH_CS − 0.932·CH_ROA + 1.029·ISSUE | score | A logistic model from Dechow et al. (2011) that estimates the probability of material misstatement rather than bankruptcy risk. Typical rule of thumb: F < 0.85 normal, 0.85–1.85 elevated, > 1.85 high risk. Core drivers include accrual intensity, receivable/inventory expansion, soft-asset mix, and financing pressure. |
| Springate S-Score (distress screening) | S = 1.03·(Working Capital/Total Assets) + 3.07·(EBIT/Total Assets) + 0.66·(EBIT/Current Liabilities) + 0.40·(Revenue/Total Assets) | score | Four-factor discriminant score originally calibrated on Canadian firms (Springate, 1978). A common interpretation is: S ≥ 0.862 safe, 0 to 0.862 grey zone, and < 0 distress risk. Because coefficients are sample-specific, use it as an early warning signal and always validate with industry context. |
| Ohlson O-Score (default probability) | O = −1.32 − 0.407·log(TA) + 6.03·(TL/TA) − 1.43·(WC/TA) + 0.0757·(CL/CA) − 1.72·OENEG − 2.37·(NI/TA) − 1.83·(FFO/TL) + 0.285·INTWO − 0.521·CHIN | score | Nine-variable logistic default model (Ohlson, 1980). Convert O-score to probability with logistic transform and read it as a one-year distress likelihood. Leverage (TL/TA), liquidity (WC/TA, CL/CA), profitability (NI/TA), and persistent losses (INTWO) are the main contributors. |
| Benford MAD (digit-distribution test) | MAD = (1/9) Σ|Observed_d − log10(1 + 1/d)|, d ∈ {1..9} | MAD | Measures how far first-digit frequencies deviate from Benford's expected distribution. Lower MAD means closer conformity. A practical benchmark is: <0.006 close fit, <0.012 acceptable, <0.015 marginal, and ≥0.015 non-conformity. This is a screening test for anomalies, not standalone proof of fraud. |
Valuation Models
Models for estimating a company's theoretical share price or enterprise value. Covers the formulas behind Explorer's DCF, Dividend Discount, and Residual Income panels.
Valuation is the modelling of a forecast. Results are dominated by the reasonableness of inputs (growth, discount rate, terminal growth) — always pair the headline number with a sensitivity analysis.
DCF (Discounted Cash Flow)
EV = Σ FCFₜ ÷ (1+WACC)^t + Terminal Value ÷ (1+WACC)^NUnit: JPY (enterprise value)Discounts N years of free cash flow at WACC and adds a perpetual-growth terminal value. FCF = EBIT × (1 − Tax) + D&A − Capex − ΔWC. Terminal value often makes up 60–80% of EV, so the result is highly sensitive to terminal growth and WACC assumptions.
Dividend Discount Model (Gordon Growth)
Implied Price = D₁ ÷ (k − g)Unit: JPY / shareD₁ = next-period dividend, k = cost of equity, g = perpetual dividend growth. Assumes dividends grow at a constant rate forever; suitable for mature, steady-dividend payers. Breaks down when k ≤ g.
Residual Income Model (RIM)
Equity Value = Opening Book Equity + Σ RIₜ ÷ (1+r)^tUnit: JPY (equity value)RIₜ = Net Income − (Opening Equity × Cost of Equity). Adds the present value of profits earned above the cost of capital onto book value. Less terminal-dependent than DCF because more of the value sits in already-recorded book numbers; diverges from DCF when reported earnings are not in cash.
| Metric | Formula | Unit | Description |
|---|---|---|---|
| DCF (Discounted Cash Flow) | EV = Σ FCFₜ ÷ (1+WACC)^t + Terminal Value ÷ (1+WACC)^N | JPY (enterprise value) | Discounts N years of free cash flow at WACC and adds a perpetual-growth terminal value. FCF = EBIT × (1 − Tax) + D&A − Capex − ΔWC. Terminal value often makes up 60–80% of EV, so the result is highly sensitive to terminal growth and WACC assumptions. |
| Dividend Discount Model (Gordon Growth) | Implied Price = D₁ ÷ (k − g) | JPY / share | D₁ = next-period dividend, k = cost of equity, g = perpetual dividend growth. Assumes dividends grow at a constant rate forever; suitable for mature, steady-dividend payers. Breaks down when k ≤ g. |
| Residual Income Model (RIM) | Equity Value = Opening Book Equity + Σ RIₜ ÷ (1+r)^t | JPY (equity value) | RIₜ = Net Income − (Opening Equity × Cost of Equity). Adds the present value of profits earned above the cost of capital onto book value. Less terminal-dependent than DCF because more of the value sits in already-recorded book numbers; diverges from DCF when reported earnings are not in cash. |
Overview Signal Thresholds
The overview panel automatically classifies companies into 3 size tiers based on total assets (Large ≥ ¥1T / Mid ≥ ¥100B / Small < ¥100B) and applies tier-specific signal thresholds ( Good / Caution / Warning). Use the toggle below to view thresholds for each tier.
Company Size
Gross Margin
Operating Margin
Net Margin
ROE
ROA
EBITDA
Equity Ratio
Current Ratio
Debt/Equity
Working Capital
Net Debt
Net Debt / EBITDA
Operating CF
Investing CF
Financing CF
FCF
EBITDA Margin
Asset Turnover
Cash Ratio
Debt Ratio
Interest Coverage
SGA Ratio
Operating CF Margin
| Metric | Good | Caution | Warning |
|---|---|---|---|
| Gross Margin | ≥ 30% | 15–30% | < 15% |
| Operating Margin | ≥ 10% | 5–10% | < 5% |
| Net Margin | ≥ 5% | 2–5% | < 2% |
| ROE | ≥ 10% | 5–10% | < 5% |
| ROA | ≥ 5% | 2–5% | < 2% |
| EBITDA | > 0 | = 0 | < 0 |
| Equity Ratio | ≥ 40% | 20–40% | < 20% |
| Current Ratio | ≥ 200% | 100–200% | < 100% |
| Debt/Equity | < 1× | 1–2× | ≥ 2× |
| Working Capital | > 0 | = 0 | < 0 |
| Net Debt | ≤ 0 | < ¥50B | ≥ ¥50B |
| Net Debt / EBITDA | < 2× | 2–4× | ≥ 4× |
| Operating CF | > 0 | = 0 | < 0 |
| Investing CF | < 0 | = 0 | > 0 |
| Financing CF | ≤ 0 | < ¥10B | ≥ ¥10B |
| FCF | > 0 | = 0 | < 0 |
| EBITDA Margin | ≥ 15% | 8–15% | < 8% |
| Asset Turnover | ≥ 1× | 0.5–1× | < 0.5× |
| Cash Ratio | ≥ 40% | 20–40% | < 20% |
| Debt Ratio | < 50% | 50–65% | ≥ 65% |
| Interest Coverage | ≥ 6× | 3–6× | < 3× |
| SGA Ratio | < 22% | 22–38% | ≥ 38% |
| Operating CF Margin | ≥ 13% | 6–13% | < 6% |
Notes
Metrics are calculated from structured financial data automatically extracted from Japanese regulatory filings.
Concept names (account items) are identified via pattern matching. Some companies using non-standard naming may have missing values.
Net Debt calculation falls back to Short-term Borrowings + Long-term Debt when a total interest-bearing debt concept is unavailable.
EBITDA uses PL-based depreciation first, falling back to the CF statement's depreciation figure when unavailable.
Signal thresholds are automatically adjusted by company size tier (Large ≥ ¥1T / Mid ≥ ¥100B / Small < ¥100B total assets). Large-caps have stricter stability requirements while small-caps need higher profitability margins.
When you edit a cell value manually, all dependent metrics recalculate immediately.