Calculations Flashcards
s1 conversion prem/discount on convertible pref shares
conversion ratio x convertible share market price
/
ordinary share market price
-1, x 100
s2 taxation on dividend income
- £2,000 div allowance
remainder taxed @ marginal dividend rates
BR 8.75%
HR 33.75%
AR 39.35%
s3 warrants
warrant conversion prem
exercise price + warrant price
/
ordinary share price
minus 1, x 100
— — — — — — — — — —
warrant gearing ratio
ordinary share price
/
warrant price
x100
— — — — — — — — — —
cash pay out (covered warrant value at expiry)
ordianry - strike / parity
s4 CFDs
how many shares were purchased?
how many shares were sold & at what price?
deduct the initial investment from the answer
s5 conversion prep/discount on convertible bonds
(USE NOMINAL FIGURES)
market price of convertible stock
/
conversion ratio price x market price of ordinary shares (FIRST)
minus 1, x100
OR NOMINALISE
s7 interest yield
coupon
/
clean price
x 100
s8 redemption yield
step 1: workout the interest yield (what is the intr yield?)
step 2: nominal price - clean price (is it capital gain or loss?)
step 3: calculate capital gain (or) loss per year (what is the gain or loss per year?)
step 4: capital gain (or) loss per year / clean price x 100 (as a % of the price paid)
step 5: add [or] subtract result onto the interest yield
basic tax payer
net flat yield = intr yield x80/100
s9 modified duration
how sensitive a bonds price is to change in intr rates
duration
/
1 + gross redemption yield
GRY as % nominal
s10 effective rate of interest
(1+r/n)^n - 1
x100
— — — — — — — — — —
r = make sure to use % nominal
s11 taxation of interest income
- PSA
BR £1,000
HR £500
AR Nil
-remainder taxed @ marginal income rates
BR 20%
HR 40%
AR 45%
s13 order-driven markets
buy and sell
based on the opposite side of the order book
s14 scrip dividends
how many would it offer?
share price
/
dividend per share
= 1 new share for every x held
how many can be taken?
shares held / ANS
price of stare price = cost of shares
cash dividend?
shares held * dividend per share
s15 rights issues, bonus issues & share splits
ex rights price
total value
/
shares in issue now
s16 operating margin
operating profit
/
sales
x 100
s17 net margin
net profit after taxation
/
sales
x100
s18 ROE
measures the % return on capital given by shareholders
net profit after taxation (and after preference dividends)
/
capital and reserves (shareholders funds)
x100
s19 ROCE
profit before interest & taxation
/
capital employed
x 100
% return achieved on capital employed. Total assets - current liabilities
s20 gearing ratio
long term debts + preference shares
/
ordinary shareholder funds
x 100
— — — — — — — — — —
how gearing levels affect profitability?
- exacerbates profits as well as low ROE
- if profits fall, companies are less likely to be able to secure loans
- any increases in interest rates will increase costs for highly geared companies
s21 interest cover
profit before interest and tax
/
gross interest payable
what does the interest cover show?
- how many times the interest bill could be paid out of current profits
s22 working capital ratio
current assets
/
current liabilities
s23 liquidity ratio
current assets - stocks
/
current liabilities
what should the liquidity ratio for a company generally be?
- be at least 1.0
- cannot be applied to all industries (supermarket, buy on credit for cash and have high turnover of stock)
s24 debt turnover
sales
/
debtors
efficency in collecting debts
(klarna, lower the better)
s25 stock turnover
cost of sales
/
stock
efficency in managing stock
s26 credit turnover
cost of sales
/
trade creditors
how many times it pays it’s creditors
s27 sales per employee
sales
/
number of employees
s28 earnings per share
profit attributable to ordinary share holders
/
number of ordinary shares in issue
(profit figure used is after tax and dividends to preference shareholders)
— — — — — — — — — —
What does earnings per share represent?
- it represents the amount in pence that the company has earned during the year for each ordinary share holder
s29 price earnings ratio
share price
/
earnings per share
s30 dividend cover
earnings per share
/
net dividend per share
— — — — — — — — — —
high dividend cover meaning?
- likely the company can maintain dividends if profits were to fall
- means the company is retaining profits for reinvestment
s31 dividend yield
dividend per share
/
current share price
*100
s32 price to book ratio
current share price
/
net asset value per share
— — — — — — — — — —
NAV is
net assets attributable to ordinary shareholders
/
number of ordinary shares in issue
s33 dividend discount models
Divs are consistent
dividend
/
return on equity
——————-
Gordons growth model:
dividend x increase
/
return on equity - dividend growth
s34 NAV
net assets attributable to ordinary shareholders
/
number of ordinary shares in issue
s35 CAPM
𝐸(𝑅𝑖)= 𝑅𝑓 + 𝛽𝑖[𝐸𝑅𝑚)−𝑅𝑓]
E(Ri) = Expected return of investment
Rf = Risk-free return
E(Rm) = Expected market return
𝛽 = 𝑠𝑒𝑛𝑠𝑖𝑡𝑖𝑣𝑖𝑡𝑦𝑡𝑜𝑚𝑎𝑟𝑘𝑒𝑡
s36 investment data
- Arithmetic mean
- Median share price
s37 present value
PV= FV / (1 + r)^𝑛
s38 standard deviation
- Difference between actual and expected return
- x2 answer
- Ans * probability
- Sum results to get the variance
- x2 variance
s39 sharpe ratio
𝑟𝑒𝑡𝑢𝑟𝑛 − 𝑟𝑖𝑠𝑘 𝑓𝑟𝑒𝑒 𝑟𝑒𝑡𝑢𝑟𝑛
/
𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑑𝑒𝑣𝑖𝑎𝑡𝑖𝑜𝑛
s40 alpha
𝑎𝑐𝑡𝑢𝑎𝑙 𝑟𝑒𝑡𝑢𝑟𝑛 − [𝑅𝐹 + 𝛽𝑖(𝑅𝑀 − 𝑅𝐹)]
s41 information ratio
𝑅𝑝− 𝑅𝐵
/
𝑡𝑟𝑎𝑐𝑘𝑖𝑛𝑔 𝑒𝑟𝑟𝑜𝑟
consistency manager beats a benchmark
s42 total return (holding period return)
𝐷+𝑉1−𝑉0
/
V0
*100
— — — — — — — — — —
D = income
V1 = selling price
V0 = acquisition price
s43 MWR
𝐷+𝑉1–𝑉0−𝐶
/
𝑉 + (𝐶 × 𝑛/12 )
*100
— — — — — — — — —
R = rate of return
V0 = value of portfolio at the start of the period
V1 = value of the portfolio at the end of the period
D = Income during the period
n = number of months remaining in the year
C = new money introduced during the year
s44 TMW
v1 / v0
x
v2 - 1 / v1 + c
