BEC 3: Financial Management Flashcards
ICP
Inventory Conversion Period
avg inventory / cogs per day (365)
PDP
Payables Deferral Period
avg payables / cogs per day (365)
RCP
Receivables Conversion Period
avg receivables / credit sales per day (365)
CCC
Cash Conversion Cycle
ICP + RCP - PDP
What is return on equity?
Net Income / Equity
What is Debt Ratio
Total Debt / Total Assets
What is profit margin
Net Income / Net Sales
What is net cash outlay
The net value of outflows and inflows
Net annual cash inflows
Cash inflow - Income taxes
Present value of cash inflow
Net annual cash inflow x PV Factor
Calculate Break Even Dollars
Fixed Costs x Contribution Margin
Economic Order Quantity
Determines how much should be ordered at one time to minimize the costs of carrying and ordering
Ex: Amazon Shipping Costs and Cart Size
Ex: # of trips taken to Meijer (gas, time)
How do you calculate the Discounted Payback Method?
- Determine the amount of the initial investment
- How much left needs to be recovered from the cash flows year 1, year 2. (What is the present value of year 1 cash flow)
How can you calculate an IRR
If there are cash flows that are sequentially the same, year after year, it is an ordinary annuity. You can then take the PV factor for that % @ # of periods.
Calculate receivables Turnover
Net credit Sales / Avg Receivables
