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BEC > BEC Formulae > Flashcards

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
Q

Discounted cash flow method

A

D/P + G =K Dividend next period/ Stock price + Growth

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26
Q

ROI

A

Net profit X Asset turnover
Net Income/Sales X sales/Investment
Sales got cancelled
ROI= NI/Investment

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27
Q

Asset turnover

A

Sales/Assets

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28
Q

Profit Margin/sales

A

NI/Sales or ROI/ Investment Turnover

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29
Q

What is the cost of funds from the sale of common stock

A

Annual dividend/ Sales price of common shares - floatation costs- underpricing

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30
Q

Residual income

A

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)

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31
Q

Return on assets

A

Income/Ave.Assets or income /sales or sales /avg.assets

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32
Q

ROI

A

Net Income/ Invested Capital

Net income/sales, sales/capital investment

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33
Q

Cost of fund from retained earnings

A

Dividend /stock price

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34
Q

Free cash flow`

A

Net operating profits after taxes+ Depreciation + Amortization -Capital expenditures-net increase in WC

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35
Q

Interest on investment

A

Invested capital x required rate of return

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36
Q

Economic value added

A

Net operating profit after taxes-cost of financing

NOPAT-(TA-CL) -WACC

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37
Q

Cost of financing

A

Total assets-current liabilities x WACC

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38
Q

Economic rate of return on C.S

A

Dividends+change in price/ Beginning price

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39
Q

ROI based on assets

A

Net Income/ Total assets or Average invested capital

40
Q

Du point ROI analysis=Return on sales x asset turnover

A

Return on sales= Net Income/sales

Asset turnover= Sales/total assets

41
Q

Market capitalization

A

Common Stock price per share x common stock O/S

42
Q

Market Ratio

A

Common stock price per share/Book value per share

Market capitalization/ Common Stockholders Equity

43
Q

Cost of funds from sale of C.S

A

Annual dividend/ Sale price of common share -flotation costs-underpricing

44
Q

Return on common equity

A

;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
Q

Target Unit to earn a desired level of income

A

Fixed cost + target income/ unit contribution margin

46
Q

Breakeven point in units

A

Fixed cost/ contribution margin

47
Q

Price elasticity of demand

A

% change in quantity demanded/% change in price

48
Q

Cost of common equity

A

Expected next dividend/Current stock price + Expected growth rate

49
Q

CVP analysis Target unit volume

A

F.C+ Target operating income/UCM

50
Q

Re-order Point

A

Safty stock+ Lead time X sales during lead time

51
Q

The number of days of receivable

A

365/Account receivable turnover

52
Q

Contribution Margin ratio

A

Revenue-Variable Costs/Revenue

53
Q

Break even in Dollars

A

Fixed costs/ Contribution Margin Ratio

54
Q

Times Interest earned

A

Sales-Cost of goods sold-administrative expense-depreciation expense /interest expense
Timesinterestearned=(Netincomebeforetax+ interest expense)/Interestexpense

55
Q

Compensating balance formula

A

Effective rate= Interest rate/Usable funds

56
Q

Target Unit Volume(Sales revenue required)

A

Fixed Costs+Target Net Income/(1.00- Tax rate)/UCM Where UCM stands for Unit Contribution Margin(Sales-Variable cost per unit)

57
Q

Co-efficient of variation

A

Standard deviation/Expected return

58
Q

Sales

A

Margin of safety+Break even point

59
Q

Degree of operating leverage

A

Change in EBIT/Change in Sales

% change in operating income/Percentage change in Unit volume

60
Q

Degree of financial leverage

A

% change in EPS/ % change in EBIT

EBIT/EBIT-INTEREST

61
Q

Excess Present value index

A

present value of future net cash inflows/Initial investment X 100

62
Q

The amount of cash

A

Equity+ Long term assets-Fixed assets-Net working capital

63
Q

Cost of preferred stock

A

/Cash dividend on Preferred stock/ Proceeds of preferred stock net of fees and costs
D/P(1-F) + G

64
Q

Economic value added

A

Net operating profit after taxes-required return where required return is =Investment XWACC

65
Q

Average collection period

A

365/ Accounts receivable turnover

66
Q

Real GDP

A

Normal GDP/GDP Deflator X 100

67
Q

COGM

A

BWIP+All the costs incurred during the period-Ending WIP

68
Q

Costs of preferred share capital

A

% of preferred stock/ preferred stock-cost of capital

69
Q

Applied factory Overhead

A

(Variable OH+ Fixed OH)Standard DLH allowed for production

70
Q

Effective rate

A

Interest expense/usable funds

71
Q

Degree of comn=bined leverage

A

%change in EPS/% change in sales

72
Q

Effective Average interest rate

A

Effective annual interest payment/Debt cash available

73
Q

Cost of retained earnings

A

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
Q

Cost of bond yield using the bond yield plus risk premium method

A

Firms own bond yield+ Market risk premium

75
Q

Debt to total capital ratio

A

Total Debt /Total capital(Debt +equity)

76
Q

Safety stock

A

First calculate daily usage

maximum lead time-usual lead time x daily usage

77
Q

Profitability index

A

Present value of net future cash inflow/present value of initial investment

78
Q

GDP deflator-Real GDP

A

Nominal GDP/GDP deflator X 100

Current year real GDP/past year real GDP -1

79
Q

Multiplier effect

A

1/1-mpc X change in spending

80
Q

Net National product

A

GDP- Depreciation

81
Q

Unemployment rate

A

Number of unemployed/total labor

82
Q

price elasticity on demand on total units

A

selling price per unit X quantity sold

83
Q

Cross elasticity of demand

A

% Change in number of units X demanded(Supplied)/ % change in price of Y

84
Q

Income Elasticity of demand

A

% change in number of units X demanded/ % change in income

85
Q

Marginal product is

A

Change in Total product/ change in level

86
Q

Average output is

A

Total product/ output

87
Q

Increase to scale

A

% increase in output/% increase in output

88
Q

growth rate

A

Return on equityX1-payout rate

89
Q

Discounted cash flow method

A

Current dividend (1+G)/ current stock price +G)

90
Q

Bond yield risk premium

A

pretax cost of long term debt+ Market risk premium

91
Q

Payout rate

A

Dividends per share/earnings per share
or
common stock dividends declared/income available to common stockholders

92
Q

Operating margin ratio

A

operating income/net sales

Operating Income= sales-cost of goods sold-selling and general administrative expenses

93
Q

Growth rate

A

1-payout rate(Retention ratio) X return on equity

94
Q

Margin of safety in percentage

A

margin of safety in dollars/total sales

95
Q

Operating cash flow ratio

A

cash flow from operations/current liablities

BEC (36 decks)

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