Calculations Flashcards
Rule of 72
72 ÷ inv. interest rate = # of yrs for investment to double
OR
72 ÷ # of yrs = interest rate needed
i.e. 72 ÷ 4 = doubled in 18 years with compounded interest
Present Value of Investment
PV = FV ÷ ((1 + r) to the nth power)
Future Value of Investment
FV = PV x ((1 + r) nth power)
Liquidity (working capital)
Current Assets - Current Liabilities = working capital
Increase – Security sales, business ops profits, sale of non-current assets
Decrease – cash dividends, paying off long-term debt, net operating losses
Current Ratio
Current Assets ÷ Current Liabilities
Higher ratio means greater liquidity
Quick Asset Ratio (Acid Test Ratio)
(Current Assets - Inventory) ÷ Current Liabilities
Stricter test of company’s ability to meet short term obligations
Debt to Equity Ratio
Basically debt to Total capitalization
Long-Term Debt ÷ (Long-term Debt + Equity, aka net worth) = % value
Book Value Per Share
(tangible assets - liabilities - par value of preferred) ÷ shares of outstanding common stock
Theoretical liquidating value of company
Earnings Per Share (EPS)
Number of shares outstanding
Current Yield (Dividend Yield)
Market value per common share
Dividend payout ratio
Annual dividends per common share ÷
Earnings per share (EPS)
Measures proportion of earnings paid to stockholders as dividends
P/E ratio
Price-to-earnings ratio
Current market price of common share ÷
Earnings Per Share (EPS)
EPS with current market price and P/E ratio
Current Market Price of common stock ÷
P/E ratio
Gross Margin
(COGS - Net Sales) ÷ Net Sales
or
(COGS - Revenues) ÷ Revenues
Discounted Cash Flow
Taking the income payments you are scheduled to receive over a given future period and adjusting that for the time value of money
Net Worth
Assets - Liabilities
