When calculating certain financial KPIs, how does Fathom annualize results?
For periods which are less that than 1 year in length, when calculating certain KPIs (ie. ROCE, ROE, Activity Ratio etc...) it is necessary to annualize results for values like EBIT or Revenue. This is to ensure that annualized result for these values are expressed properly as a percentage of balance sheet values.
Let's consider the following example:
If revenue for the month of October is $96,569. And October has 31 days. Then the annualised revenue will be $1,137,022 (assuming that it is not a leap year).
This is calculated as = ($96,569 / 31) * 365
If the result is slightly different, then this will likely be to the precision and rounding. ie. the revenue amount may actually include cents ie. $96,569.47