All Questions Flashcards
What is myopic management?
Means possibly choosing quick returns over slower but ultimately the higher one.
What are the three E’s?
Economy - doing things at a low price
Efficiency - maximise output as efficiently as possible
Effectiveness - achieve objectives
What is ARR also know as?
Return on Capital Employed
Average profits / average investment
Ratio for ROCE
Operating profit (PBIT) / Capital Employed
How do you calculate average investment for ARR?
Average investment - Cost + residual value / 2
And
Average profits / average investment
Name the money market securities
- Treasury bills
- Certificates in deposit
- Commercial Papers
- Bankers Acceptance
Capital employed
NCA + CA - Non Current Liabilities
Or
Share Capital + Reserves + long term loans
Gross Margin
Gross profit / sales
Net margin
Net profit / sales
RI
Profit after tax - (Operating assets x cost of capital)
Asset turnover
Sales / capital employed
Payable days
Payables balance / credit purchases x 365
Receivable days
Receivable balance / credit sales x 365
Inventory
Inventory / cost of sales x 365
Current ratio
Current assets / current liabilities
Quick ratio
Current assets - inventory / current liabilities
Financial gearing
Debt / equity
Operational gearing
Contribution / PBIT
Dividend cover
PAT / total dividend
Dividend yield
Dividends per share / share price
Interest cover
PBIT / interest
Interest yield
(Coupon rate / market price) x 100%
PE ratio
Share price / EPS
Define current ratio
Tells you whether the company had to sell all its readily available assets would it be able to pay off its immediate debt
TERP RATIO
MV of shares in use + proceeds from new shares / number of shares in issue after
Value of right
TERP - issue price
Value of right per existing share
TERP - issue price / no of shares needed to obtain right
How to calculate Equivalent Annual Cost?
PV of costs / annuity factor
What is systematic risk?
Market wide risk such as state of company
What is non systematic risk?
Risk that is unique to a certain asset or company.
Sensitivity Analysis
NPV of project / PV of item
ROE
PAT + preference dividends / ordinary share cap + reserves
EPS
PAT and int and preference shares / number of ordinary shares
Total shareholder return
Dividend for year + increase in share price / share price at start of year
How do you calculate total value of the company?
Total earnings x 1 / earnings yield
