BEC Formulas

Question 1

APR

Answer 1

Effective interest rate x # of periods in a year
OR
Annual interest paid / net proceeds

Question 2

Asset Turnover

Answer 2

Sales / Total Assets

Question 3

Breakeven point in units

Answer 3

Fixed Costs / CM

Question 4

Breakeven point in dollars

Answer 4

Fixed costs / CM ratio

Question 5

Cash conversion cycle

Answer 5

Inventory conversion period + receivables conversion period - payables conversion period

Question 6

Inventory conversion period

Answer 6

Avg inventory / cost of sales per day
OR
365 / Inventory turnover

Question 7

Receivables conversion (collection) period

Answer 7

Avg AR / credit sales per day
OR
365 / AR turnover

Question 8

Payables conversion period

Answer 8

Avg AP / COGS per day

365 / AP turnover

Question 9

Current ratio

Answer 9

Current assets / Current liabilities

Question 10

Working capital

Answer 10

Current assets - Current liabilities

Question 11

Contribution margin

Answer 11

Sales - VC

Question 12

Contribution margin ratio

Answer 12

Contribution margin / sales

Question 13

Dividend payout ratio

Answer 13

Cash dividend per share / EPS

Question 14

Economic value added

Answer 14

Net operating profit after taxes - cost of financing

Question 15

Zero growth stock / Per share valuation / Perpetuities

Answer 15

Price = Dividend / Required return

Question 16

Effective interest rate

Answer 16

Interest paid / Net proceeds of loan

Question 17

Effective annual percentage rate

Answer 17

(1 + Effective periodic rate)^ # compounding periods - 1

Question 18

Simple interest

Answer 18

Principal x annual rate x # years

Question 19

Compound interest

Answer 19

Principal x (1 + rate)^#years

Question 20

Nominal rate of return

Answer 20

Real interest rate + inflation premium

Question 21

Constant growth model

Answer 21

Current price at period “t” = Dividend one year after period “t” / (Required return - Growth rate)

To calc “D” = Current dividend x (1 + Growth rate)

Question 22

Price earnings ratio

Answer 22

Price or value today / Expected earnings in one year

E can be calculated by E x (1 + G)

Question 23

PEG ratio

Answer 23

(Price or value today / Expected earnings in one year) / Growth rate

Also: P = PEG x E x G

Question 24

Price to sales ratio

Answer 24

Price today / Expected Sales in one year

Question 25

Inventory turnover

Answer 25

COGS / Avg inventory

Question 26

Multiplier effect

Answer 26

1 / (1 - MPC)

Question 27

Real GDP

Answer 27

(Nominal GDP / GDP deflator) x 100

Question 28

Days sales in inventory

Answer 28

365 / Inventory turnover

Question 29

Quick ratio

Answer 29

Cash + mktble securities + AR / Current Liabilities

Question 30

Residual income

Answer 30

Operating profit - interest on investment (or req rate of return)

Question 31

Times interest earned ratio

Answer 31

EBIT / interest expense

Question 32

Labor efficiency

Answer 32

Std rate*(std hrs - actual hrs)

Question 33

Labor rate

Answer 33

Actual hours*(std rate - actual rate)

Question 34

Material price

Answer 34

Actual qty*(std price - actual price)

Question 35

Material efficiency

Answer 35

Std price*(Std qty - actual qty)

Question 36

WACC

Answer 36

(cost of equity x % equity in capital structure) + (weight avg cost of debt x % debt in capital structure)

Question 37

Cost of financing

Answer 37

(Total assets - Current liab) * WACC

Question 38

Cross-elasticity

Answer 38

% change in demand for product A / % change in price for product B

Question 39

Income elasticity

Answer 39

% change in qty demanded / % change in income

Question 40

Internal rate of return

Answer 40

Initial investment + CF in period n / (1 + Discount rate)^nth power (# of periods)

Question 41

Operating leverage

Answer 41

% change in EBIT / % change in sales

Question 42

Financial leverage

Answer 42

% change in EPS / % change in EBIT

Question 43

Combined total leverage

Answer 43

DOL x DFL OR % change in EPS / % change in sales

Question 44

Operating profit margin

Answer 44

Operating profit / net sales

Question 45

Profitability index

Answer 45

NPV / Cost of project

Question 46

Reorder point

Answer 46

Delivery time of stock + safety stock

Question 47

ROI

Answer 47

Net income / total assets

Question 48

Safety stock

Answer 48

(Max. daily demand * max. lead time) - reorder point

Question 49

Economic order quantity

Answer 49

Square root of: (2 x annual sales x order cost) / carrying cost per unit

Question 50

Margin of safety

Answer 50

Sales - Breakeven sales