Profitability Calculator

How do you calculate profitability?


ALM First’s Profitability Calculator is an interactive tool to model product profitability and return on capital. Profitability is calculated in a risk-adjusted framework, revealing the adequacy of the risk/return tradeoff of a product. Risk-adjusting gives insight into the sources of return and seeks to express how much risk is present in producing a return.

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Find out how the ALM First Profitability Calculator can work for you.

Benefits of ALM First Profitability Calcuatlor

Select your product input. Select your product structure. Input your desired coupon. It’s that simple. Profitability Outputs are calculated with estimated returns based on up-to-date market rates and recommendations are provided for your specific assets.

  • Visualize profitability on the go
    The visualizer provides analytics on-demand and offline from anywhere.
  • Market rates updated regularly
    Market rate data is frequently updated with the most up-to-date market environment and risk estimates.
  • Evaluate in a risk-adjusted framework
    ALM’s approach to visualizing components of profitability provides invaluable insight to maximize member/customer value and promote effective product management through the evaluation of the risk/return tradeoff.

What does an economic return tell me?

An economic return indicates profitability of a financial instrument in a risk-adjusted framework. This tool is designed for two main purposes: to evaluate appropriate pricing given specific risk considerations and compare relative value across multiple assets with varying risk profiles.

How should I use this pricing tool?

Many pricing methods miss a critical component: current and reliable risk-based costs. The Profitability Calculator employs risk analytics produced weekly using a stochastic cash flow model which, when combined with your internal cost structure, creates a dependable framework for risk-adjusted pricing and evaluation of profitability.

What can I do to use this tool more effectively?

Tracking internal costs such as product-specific servicing costs, credit costs by tier, and material upfront costs is highly recommended to improve the efficacy of the tool. The more granular the cost assumptions, the more precise the results.

What should I use for my credit cost assumption?

The lifetime projected loss (charge-off net of recovery) stated as an average annual percentage. Typically historical data is gathered on both the product and the risk tier to project the cost of the credit risk.

All investing is subject to risk, including the possible loss of the money you invest.

These calculators are designed to be informational and educational tools only, and when used alone, do not constitute investment advice. We strongly recommend that you seek the advice of a financial services professional before making any type of investment. We also encourage you to review your investment strategy periodically as your financial circumstances change. This model is provided as a rough approximation of future financial performance. The results presented by this calculator are hypothetical and may not reflect the actual growth of your own investments. Profitability Calculator provided exclusively by ALM First Analytics, a subsidiary of ALM First Group, LLC (“ALM First”). The illustrations provided by the profitability calculator are hypothetical and do not represent the return on any particular investment. All investing is subject to risk, including the possible loss of your entire investment. Furthermore, ALM First Group, LLC (“ALM First”) and its affiliates are not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided by these tools. ALM First is not responsible for any human or mechanical errors or omissions.

“ALM First” is a brand name for a financial services business conducted by ALM First Group, LLC (“ALM First”) through its wholly owned subsidiaries: ALM First Financial Advisors, LLC (“ALM First Financial Advisors”); ALM First Advisors, LLC (“ALM First Advisors”); and ALM First Analytics, LLC (“ALM First Analytics”).  Investment advisory services are offered through ALM First Financial Advisors, an SEC registered investment adviser with a fiduciary duty that requires it to act in the best interests of clients and to place the interests of clients before its own; however, registration as an investment advisor does not imply any level of skill or training.  Moreover, ALM First Financial Advisors, LLC (“ALM First Financial Advisors”), an affiliate of ALM First Group, LLC (“ALM First”), is a separate entity and all investment decisions are made independently by the asset managers at ALM First Financial Advisors. Access to ALM First Financial Advisors is only available to clients pursuant to an Investment Advisory Agreement and acceptance of ALM First Financial Advisors’ Brochure. You are encouraged to read these documents carefully. Balance sheet advisory services are offered through ALM First Advisors.  Financial reporting services, loan introduction services, and other special project services are offered through ALM First Analytics.  Neither ALM First nor any of its subsidiaries provide legal, tax, or accounting advice.

INVESTMENT PRODUCTS ARE: • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, ALM FIRST OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.