NISM Series XV : Research Analyst Certification Exam Notes

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  • Net Sales: This is the income which the company generates by selling its goods and services. Applicable indirect tax (GST) has to be deducted from the Gross Sales to get the Net Sales figure as these taxes are collected by the business for the government and don't belong to the business
  • Direct Costs: These are costs which can be attributed directly to business. Examples of these types of costs are raw material, salary, electrical costs, and others. Reducing operating costs will translate into higher profitability. Lower the direct costs, higher the operating efficiency of the firm. Costs may be variable, such as raw materials, semi-variable, such as employee costs or fixed, such as plant and machinery
  • Earnings Before Interest Tax Depreciation and Amortization (EBITDA): This is the difference between Net Sales and Direct Costs. EBIDTA is a measure of the operating efficiency of the company. It enables comparison between companies that may have different capital structures, depreciation policies and tax rates. Higher the EBITDA, better the firm
  • EBITDA Margin: This is a ratio which calculates the EBITDA as a percentage of Net Sales
  • Depreciation/ Amortization: Whenever a company purchases an asset, it is used for a long period of time and hence, it does not make sense to show entire expenditure at once in the P/L statement.

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