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BEC Formulae Flashcards

1
Q

Marginal propensity to consume

A

Change in Spending/Change in income

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2
Q

Marginal propensity to save

A

Change in savings/change in income
or
1-marginal propensity to consume

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3
Q

Price elasticity of demand

A

% change in quantity demanded/% change in price

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4
Q

CPI calculation

A

CPI current-CPI last/ CPI Last*100

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5
Q

Returns to scale

A

Percentage Increase in output/Percentage increase in input

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6
Q

Accounting profit

A

Revenue -accounting cost

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7
Q

Economic cost

A

Explicit+Implicit cost

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8
Q

Working capital

A

Current assets-Current Liablities

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9
Q

Current ratio

A

CA/CL

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10
Q

Quick Ratio

A

Quick Tests/CL

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11
Q

Cash conversion cycle formulae

A

CCC=ICP+RDP-PDP
Where Inventory conversion period= 365/(cogs/Inventory)
RDP= 365/(Sales/Receivable)
PDP= 365/(COGS/Payable)
Operating Cycle: 365/Purchases X Average Inventories+ 365/Cr.Sales X Avg. Accounts Receivable

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12
Q

A/R turnover

A

Net credit sales/ Average AR

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13
Q

Inventory turnover ratio

A

COGS/Average Inventory

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14
Q

Number of days supply in average inventory

A

360/Inventory Turnover

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15
Q

Pay Back period

A

Net Initial Investment/After tax annual net cash inflow

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16
Q

IRR

A

Investment/Annual cash flows= When we divide initial investment/annual cash flows. we will get one percentage . Match it with the table given that is the IRR
$7,791 ×
PV at i for 10 periods
=
$50,000
6.418
Using the present value table, 6.418 is PV at 9% for 10 periods.

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17
Q

ARR

A

Accounting income/ Average investment

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18
Q

NPV

A

PV of net cash Inflows-PV of net cash outflows

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19
Q

Economic Ordering Quantity

A

Squre root of 2so/c where s= annual salesin units o= cost per purchase order c=carrying cost per unit

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20
Q

Short term debt

A

Discount %/100-discount% x 365 or 360/Total pay period-Discount period

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21
Q

Cost of loan

A

Interest paid/ Net funds available

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22
Q

Net cost of debt

A

Effective interest rate x (1-Tax rate)

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23
Q

Weighted average cost of capital

A

Investment structure(percentage of investments in total investments) X Cost of investment= WACC

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24
Q

CAPM

A

R+ B(m-r) C= cost of capital R=risk free rate B= Beta coefficient of Comparable publicly traded common stock, M= Market rate of return . B is referred to as particular change in stock compared to overall market change. Change in stock price /Change in market price

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25
Discounted cash flow method
D/P + G =K Dividend next period/ Stock price + Growth
26
ROI
Net profit X Asset turnover Net Income/Sales X sales/Investment Sales got cancelled ROI= NI/Investment
27
Asset turnover
Sales/Assets
28
Profit Margin/sales
NI/Sales or ROI/ Investment Turnover
29
What is the cost of funds from the sale of common stock
Annual dividend/ Sales price of common shares - floatation costs- underpricing
30
Residual income
Net income from the income statement-Required Return Required return=NBV x Hurdle rate First step= Average invested capital =sales/capital turnover Second Step= Operating income-(Imputed ratexaverage invested capital)
31
Return on assets
Income/Ave.Assets or income /sales or sales /avg.assets
32
ROI
Net Income/ Invested Capital | Net income/sales, sales/capital investment
33
Cost of fund from retained earnings
Dividend /stock price
34
Free cash flow`
Net operating profits after taxes+ Depreciation + Amortization -Capital expenditures-net increase in WC
35
Interest on investment
Invested capital x required rate of return
36
Economic value added
Net operating profit after taxes-cost of financing | NOPAT-(TA-CL) -WACC
37
Cost of financing
Total assets-current liabilities x WACC
38
Economic rate of return on C.S
Dividends+change in price/ Beginning price
39
ROI based on assets
Net Income/ Total assets or Average invested capital
40
Du point ROI analysis=Return on sales x asset turnover
Return on sales= Net Income/sales | Asset turnover= Sales/total assets
41
Market capitalization
Common Stock price per share x common stock O/S
42
Market Ratio
Common stock price per share/Book value per share | Market capitalization/ Common Stockholders Equity
43
Cost of funds from sale of C.S
Annual dividend/ Sale price of common share -flotation costs-underpricing
44
Return on common equity
;Net income available to common shareholders /Average equity net income available to shareholders- value of preferred stock* 6% . Average common equity is (opening equity- preferred stock+Retained earings+Accumulatd oter comprehensive income- closing equity-Preferred stock/2
45
Target Unit to earn a desired level of income
Fixed cost + target income/ unit contribution margin
46
Breakeven point in units
Fixed cost/ contribution margin
47
Price elasticity of demand
% change in quantity demanded/% change in price
48
Cost of common equity
Expected next dividend/Current stock price + Expected growth rate
49
CVP analysis Target unit volume
F.C+ Target operating income/UCM
50
Re-order Point
Safty stock+ Lead time X sales during lead time
51
The number of days of receivable
365/Account receivable turnover
52
Contribution Margin ratio
Revenue-Variable Costs/Revenue
53
Break even in Dollars
Fixed costs/ Contribution Margin Ratio
54
Times Interest earned
Sales-Cost of goods sold-administrative expense-depreciation expense /interest expense Times interest earned = (Net income before tax+ interest expense )/ Interest expense
55
Compensating balance formula
Effective rate= Interest rate/Usable funds
56
Target Unit Volume(Sales revenue required)
Fixed Costs+Target Net Income/(1.00- Tax rate)/UCM Where UCM stands for Unit Contribution Margin(Sales-Variable cost per unit)
57
Co-efficient of variation
Standard deviation/Expected return
58
Sales
Margin of safety+Break even point
59
Degree of operating leverage
Change in EBIT/Change in Sales % change in operating income/Percentage change in Unit volume
60
Degree of financial leverage
% change in EPS/ % change in EBIT | EBIT/EBIT-INTEREST
61
Excess Present value index
present value of future net cash inflows/Initial investment X 100
62
The amount of cash
Equity+ Long term assets-Fixed assets-Net working capital
63
Cost of preferred stock
/Cash dividend on Preferred stock/ Proceeds of preferred stock net of fees and costs D/P(1-F) + G
64
Economic value added
Net operating profit after taxes-required return where required return is =Investment XWACC
65
Average collection period
365/ Accounts receivable turnover
66
Real GDP
Normal GDP/GDP Deflator X 100
67
COGM
BWIP+All the costs incurred during the period-Ending WIP
68
Costs of preferred share capital
% of preferred stock/ preferred stock-cost of capital
69
Applied factory Overhead
(Variable OH+ Fixed OH)Standard DLH allowed for production
70
Effective rate
Interest expense/usable funds
71
Degree of comn=bined leverage
%change in EPS/% change in sales
72
Effective Average interest rate
Effective annual interest payment/Debt cash available
73
Cost of retained earnings
First we have to compute dividend per share expected at eh end of the year D/P+G = where D is annual stock dividend This gives D1. D1/P +G D(as computed in first step) P is common price pershare +G is the growth rate
74
Cost of bond yield using the bond yield plus risk premium method
Firms own bond yield+ Market risk premium
75
Debt to total capital ratio
Total Debt /Total capital(Debt +equity)
76
Safety stock
First calculate daily usage | maximum lead time-usual lead time x daily usage
77
Profitability index
Present value of net future cash inflow/present value of initial investment
78
GDP deflator-Real GDP
Nominal GDP/GDP deflator X 100 | Current year real GDP/past year real GDP -1
79
Multiplier effect
1/1-mpc X change in spending
80
Net National product
GDP- Depreciation
81
Unemployment rate
Number of unemployed/total labor
82
price elasticity on demand on total units
selling price per unit X quantity sold
83
Cross elasticity of demand
% Change in number of units X demanded(Supplied)/ % change in price of Y
84
Income Elasticity of demand
% change in number of units X demanded/ % change in income
85
Marginal product is
Change in Total product/ change in level
86
Average output is
Total product/ output
87
Increase to scale
% increase in output/% increase in output
88
growth rate
Return on equityX1-payout rate
89
Discounted cash flow method
Current dividend (1+G)/ current stock price +G)
90
Bond yield risk premium
pretax cost of long term debt+ Market risk premium
91
Payout rate
Dividends per share/earnings per share or common stock dividends declared/income available to common stockholders
92
Operating margin ratio
operating income/net sales | Operating Income= sales-cost of goods sold-selling and general administrative expenses
93
Growth rate
1-payout rate(Retention ratio) X return on equity
94
Margin of safety in percentage
margin of safety in dollars/total sales
95
Operating cash flow ratio
cash flow from operations/current liablities

BEC (36 decks)

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