BEC Formulas

Question 1

APR (annual percentage return)

Answer 1

APR (annual percentage return) = Effective Interest Rate * # of periods in year

Question 2

Asset turnover

Answer 2

Asset turnover = Sales / Total Assets

Question 3

Average accounts receivable

Answer 3

Average accounts receivable = (Beg. A/R + End. A/R) / 2

Question 4

Average accounts receivable collection period

Answer 4

Average accounts receivable collection period = sales on credit / average accounts receivable

Question 5

Average inventory

Answer 5

Average inventory = (Beginning inventory + Ending inventory) / 2 Make sure to use 365 days per year unless stated otherwise

Question 6

Average total assets

Answer 6

Average total assets = (Beginning total assets + Ending total assets) / 2

Question 7

Book value per share

Answer 7

Book value per share = common stock equity / common stock shares outstanding

Question 8

Breakeven Point in terms of dollars

Answer 8

Breakeven Point in terms of dollars = fixed costs / contribution margin ratio

Question 9

Breakeven Point in terms of units

Answer 9

Breakeven Point in terms of units = fixed costs / Contribution Margin

Question 10

Cash conversion cycle

Answer 10

Cash conversion cycle = inventory conversion period + receivables collection period - payables deferrable period

Question 11

Common stockholders_ equity

Answer 11

Common stockholders_ equity = stockholders_ equity _ preferred stock liquidation value

Question 12

Contribution Margin

Answer 12

Contribution Margin = revenue _ variable costs

Question 13

Contribution Margin Ratio

Answer 13

Contribution Margin Ratio = (sales _ variable costs) / sales

Question 14

Cost of financing

Answer 14

Cost of financing= (Total assets _ current liabilities) * Weighted average cost of capital

Question 15

Cost of Goods Sold

Answer 15

Cost of Goods Sold = Beg. Inventory + Inv. Purchases _ End. Inventory

Question 16

Cross-Elasticity

Answer 16

Cross-Elasticity = % change in demand for certain product A / % change in price of certain product B.

Question 17

Current ratio

Answer 17

Current ratio = current assets / current liabilities

Question 18

Debt to equity

Answer 18

Debt to equity = Total debt / total equity

Question 19

Debt to total assets

Answer 19

Debt to total assets = total liabilities / total assets

Question 20

Discounted Payback Period

Answer 20

Discounted Payback Period = multiply by Present Value factor until initial invested amount reached. Disregard salvage value

Question 21

Dividend Payout Ratio

Answer 21

Dividend Payout Ratio = cash dividend per share / Earnings per share

Question 22

Economic Value Added

Answer 22

Economic Value Added = net operating profit after taxes (NOPAT) _ cost of financing

Question 23

Effective Interest Rate

Answer 23

Effective Interest Rate = (principle * rate * time) / principle

Question 24

Fixed asset turnover

Answer 24

Fixed asset turnover = sales / average net fixed assets

Question 25

Gross Margin

Answer 25

Gross Margin = revenue _ cost of goods sold (or gross profit)

Question 26

Gross Profit

Answer 26

Gross Profit = revenue _ cost of goods sold

Question 27

Income Elasticity

Answer 27

Income Elasticity = % change in quantity demanded / % change in income

Question 28

Internal Rate of Return

Answer 28

Internal Rate of Return = Initial Investment + Cash Flow in Period n/ (1 + Discount Rate) to the nth power (# of periods).

Question 29

Inventory conversion period

Answer 29

Inventory conversion period = Average Inventory / Cost of sales per day

Question 30

Inventory Turnover

Answer 30

Inventory Turnover = cost of goods sold / average inventory

Question 31

Marginal propensity to consume

Answer 31

Marginal propensity to consume = change in spending / change in disposable income

Question 32

Marginal propensity to save

Answer 32

Marginal propensity to save = change in savings / change in income

Question 33

Marginal utility

Answer 33

Marginal utility = change in total utility / change in quantity

Question 34

Market Capitalization

Answer 34

Market Capitalization = Common stock price per share * common stock shares outstanding

Question 35

Market/Book Ratio

Answer 35

Market/Book Ratio = common stock price per share (or market value)/ book value per share

Question 36

Number of Days Sales in Inventory

Answer 36

Number of Days Sales in Inventory = # of days in year (usually 365 or 360) / Inventory Turnover

Question 37

Operating leverage

Answer 37

Operating leverage= % change in operating income / % change in unit volume

Question 38

Operating Profit Margin

Answer 38

Operating Profit Margin = Operating profit / net sales

Question 39

Price/Earning (PE) Ratio

Answer 39

Price/Earning (PE) Ratio = common stock price per share / Earning per share

Question 40

Profitability Index

Answer 40

Profitability Index = project net present value / cost of project

Question 41

Quick Ratio

Answer 41

Quick Ratio = Quick assets (cash, marketable securities, and A/R) / current liabilities

Question 42

Receivable Turnover

Answer 42

Receivable Turnover = Net credit sales / average accounts receivable

Question 43

Receivables Collection Period

Answer 43

Receivables Collection Period = Average Accounts Receivable / Credit Sales per day

Question 44

Reorder Point

Answer 44

Reorder Point= delivery time of stock + safety stock or could be stated as = average daily demand * average lead time

Question 45

Residual Income (RI)

Answer 45

Residual Income (RI) = operating profit _ interest on investment (or required rate of return)

Question 46

Return on Assets (ROA)

Answer 46

Return on Assets (ROA) = net income / average total assets

Question 47

Return on Equity (ROE)

Answer 47

Return on Equity (ROE) = net income / Average common stockholders_ equity

Question 48

Return on Investment (ROI)

Answer 48

Return on Investment (ROI) = Net Income / Total Assets

Question 49

Return on sales (ROS)

Answer 49

Return on sales (ROS) = net income / Sales

Question 50

Safety Stock

Answer 50

Safety Stock= (Max. Daily demand * Max. Lead time) _ reorder point

Question 51

Times interest Earned Ratio

Answer 51

Times interest Earned Ratio = earnings before interest and taxes / interest expense

Question 52

Total asset turnover

Answer 52

Total asset turnover = sales / average total assets

Question 53

Total costs

Answer 53

Total costs = fixed costs + variable costs or y = mx + b, where m = slope, x = variable value, and b = y intercept

Question 54

Weighted Average Cost of Capital

Answer 54

Weighted Average Cost of Capital = [(cost of capital A / Total Amount)(rate of cost)(1-Tax Rate)] + [(cost of capital B / Total cost amount)(rate of cost)]

Question 55

Work in process

Answer 55

Work in process = Direct Material used + Direct Labor + Manufacturing Overhead