EXTRA (Performance Measures) Flashcards
What is the CAPM formula?
Risk Free Rate + (Market Rate - Risk Free Rate) * Beta
What is the formula for material variance?
Total Variance = Price Variance + Quantity Variance
Price Variance = (Actual Q * Actual P) - (Actual Q * Std P)
Quantity Variance = (Std Q * Std P) - (Actual Q * Std P)
NOTE: Quantity Variance uses Standard Price for both actual and standard quantities
What is the times interest earned formula?
(Earnings before interest and tax) / (Interest Expense)
Notes: Earnings before tax is usually Sales - COGS - Admin expenses - Depreciation expenses
Formula: Return on Sales?
(Net Income) / (Sales) = Return on Sales
Note: It could also be (Operating Profit) / (Sales)
Formula: Asset Turnover
(Sales) / (Total Assets) = Asset Turnover
Formula: Return on Investment?
(Net Operating Profit) / (Avg Invested Capital) = ROI
Note: It’s the AVERAGE Invested Capital
Formula: Inventory Turnover?
(COGS) / (Avg Inventory) = Inventory Turnover
Avg Inventory = (Beg Inv + End Inv) / 2
Formula: Book Value per Share?
(Common Stock + Retained Earnings) / (Outstanding Shares) = Book Value per Share
Formula: Residual Income?
(Operating Profit) - (Interest on Investment) = Residual Income
Interest on Investment = (Required Rate of Return) x (Invested Capital)
What is 6 Sigma used for, and what are the measurements of 6 Sigma?
6 Sigma = statistical measure of how close a product comes to its goal quality
1 Sigma = 68% of products are good
3 Sigma = 99.7%
6 Sigma = 99.999999997%
Formula: Economic Value Added (EVA)?
(Net Operating Profit) - (Taxes) - (Weighted Avg Cost of Capital) = EVA
Formula: Free Cash Flow
(Net Operating Profits after Taxes)
+ (Depreciation & Amortization) - (Capital Expenditures)
- (Changes in Working Capital)
= Free Cash Flow
Formula: Operating Profit Margins?
(Operating Profit) / (Sales) = Operating Profit Margin
Note: Sales - COGS - General and Admin Expenses
Formula: Debt to Equity Ratio?
(Total Debt) / (Total Equity) = Debt to Equity Ratio
Note:
Total Debt = Current + Long Term Debt
Total Equity = Stockholder’s Equity
Formula: Quick Ratio?
(Current Assets - Inventory) / (Current Liabilities) = Quick or Acid Test Ratio
Note:
It’s Current Asset divided by Current Liability unlike Debt to Equity Ratio where the Debt is in the Numerator.
Current Asset = usually Cash + Marketable Securities + Account Receivable