A Flashcards
what are the accounting treatments for business combinations
- include the requirement of consolidation of subsidiaries under the control of parent (IFRS & US GAAP)
- majority ownership of a parent (IFRS)
if there is a net liability position on the balance sheet when a company translate its financial statements for foreign subsidiary
there is a positive translation
P/E ratio formula
market price per share/ primary EPS
how to calculate estimated value per share
- EPS = net income/ # of shares outstanding
2. EPS X # (i.e. twelve times earnings of other company)
dividend yield on common stock
(annual dividend per common share)/ (market price of common stock)
2. (total common stock dividend (paid)/( # of common stock shares outstanding)
dividend payout ratio formula
= dividend per common stock/fully diluted earnings per share
= dividend payout per share/income per share [net inc/share outstanding]
days sales in receivable
= ar average/ AR credit sales [sales * % on credit]
dividend yield
= dividends per common share / current market price per share
EPS overiew
- earnigns available to common shareholder/ # of common share outstanding
a. net icnome - preferred dividends = earnings available to common shareholder
b. preferred dividends = # shares X % of $ par
degree of financial leverage
EBIT/EBT
- a DFL of # [1.25] implies that every 1% in increase in operating income will result in 1.25% imcrease in EPS
Degree of operating leverage (DOL)
= contribution margin/operating
=% change in EBIT/ % change in sales
times interest earned formula
=operating income/interest expense
days sales in inventory formula
=average inventory/ (COGS/365)
fixed asset to equity ratio
= fixed assets / shareholders equity
when debt-equity ratio is low means?
a lower ratio the lower the risk
