BEC Formulas

Question 1

Debt to Equity Ratio

Answer 1

Total Liabilities / Total Equity

Question 2

Times Interest Earned

Answer 2

Earnings Before Interest & Taxes / Interest Expense

Question 3

Current Ratio

Answer 3

Current Assets / Current Liabilities

Question 4

Quick Ratio

Answer 4

Cash Equivalent + AR / Current Liabilities

Question 5

Cost of Retained Earnings

Answer 5

(FY Dividends per share / Current Market price per share) + Growth rate of Dividends per share

Question 6

Weighted Average Cost of Capital

Answer 6

((E/V) x Re) + ((D/V) x Rd x (1-Tc))
where:
E=Market value of the firm’s equity
D=Market value of the firm’s debt
V=E+D
Re=Cost of equity
Rd=Cost of debt
Tc=Corporate tax rate

Question 7

Cost of Preferred Stock

Answer 7

((Preferred Rate x Par value) / Market value of Preferred Stock

Question 8

After Tax Cost of Debt

Answer 8

Pre-tax loan/bond amount x (1 - Tax rate)

Question 9

Market Capitalization

Answer 9

(Common Stock Acct / Par Value) x Market Value per share

Question 10

Total value of equity using sector P/E

Answer 10

Net Income x P/E multiple

Question 11

Total Value of equity using Dividend Discount Model

Answer 11

[Current dividends x (1 + Growth rate)] / (Cost of equity - Growth rate)

Question 12

Increase of Gross Receivables

Answer 12

(Ending AR + YE Allowance for Credit loss) - (Beginning AR + PY Allowance for Credit loss)

Question 13

Net Cash Outflow

Answer 13

Purchase Price + Transportation Cost + Installation Cost

Question 14

Asset Turnover

Answer 14

Sales / Assets

Question 15

Profit Margin

Answer 15

Net Income / Sales; ROI / Asset Turnover

Question 16

Cost of Credit discount

Answer 16

[360 / (Total pay period - Discount period)] x [Disc % / (100% - Disc %)]

Question 17

Return on Assets

Answer 17

Net Income / total Assets

Question 18

Elasticity Formula

Answer 18

[(FQ - CQ) / CQ] / [(FP - CP) / CP]
FQ: Future Quantity demanded
CQ: Current Quantity demanded
FP: Future Price
CP: Current Price