Back-Of-The-Envelope Calculation

Filed Under » ,
Dictionary Says

Definition of 'Back-Of-The-Envelope Calculation'

An informal mathematical computation, often performed on a scrap of paper such as an envelope. A back-of-the-envelope calculation uses estimated and/or rounded numbers to quickly develop a ballpark figure. The result should be more accurate than a guess, but will be less accurate than a formal calculation performed using precise numbers and a spreadsheet or calculator.

Investopedia Says

Investopedia explains 'Back-Of-The-Envelope Calculation'

Back-of-the-envelope calculations might be used to determine whether further research and more detailed calculations are warranted. For example, an investor might look at a company's annual report and do a back-of-the-envelope calculation to get its price-to-earnings ratio. If it is low enough to imply value, the investor can do a proper calculation which might include factoring in the weighted average shares outstanding for the year. If the quick estimate gave a high P/E ratio, time could be saved.
Search results for

'Back-Of-The-Envelope Calculation'

  • Med-Tech Choice Is Simply Intuitive

    http://stocks.investopedia.com/stock-analysis/2011/Med-Tech-Choice-Is-Simply-Intuitive-ISRG-MDT-SYK-GE-SI-STJ-BSX0125.aspx
    ... Revenue growth in instruments was supported by a 35% increase in DaVinci-assisted
    procedures and a back-of-the-envelope calculation suggests that procedure ...

Related Articles

Partner Links