EXTRA (Performance Measures) Flashcards

1
Q

What is the CAPM formula?

A

Risk Free Rate + (Market Rate - Risk Free Rate) * Beta

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2
Q

What is the formula for material variance?

A

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

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3
Q

What is the times interest earned formula?

A

(Earnings before interest and tax) / (Interest Expense)

Notes: Earnings before tax is usually Sales - COGS - Admin expenses - Depreciation expenses

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4
Q

Formula: Return on Sales?

A

(Net Income) / (Sales) = Return on Sales

Note: It could also be (Operating Profit) / (Sales)

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5
Q

Formula: Asset Turnover

A

(Sales) / (Total Assets) = Asset Turnover

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6
Q

Formula: Return on Investment?

A

(Net Operating Profit) / (Avg Invested Capital) = ROI

Note: It’s the AVERAGE Invested Capital

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7
Q

Formula: Inventory Turnover?

A

(COGS) / (Avg Inventory) = Inventory Turnover

Avg Inventory = (Beg Inv + End Inv) / 2

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8
Q

Formula: Book Value per Share?

A

(Common Stock + Retained Earnings) / (Outstanding Shares) = Book Value per Share

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9
Q

Formula: Residual Income?

A

(Operating Profit) - (Interest on Investment) = Residual Income

Interest on Investment = (Required Rate of Return) x (Invested Capital)

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10
Q

What is 6 Sigma used for, and what are the measurements of 6 Sigma?

A

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%

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11
Q

Formula: Economic Value Added (EVA)?

A

(Net Operating Profit) - (Taxes) - (Weighted Avg Cost of Capital) = EVA

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12
Q

Formula: Free Cash Flow

A

(Net Operating Profits after Taxes)
+ (Depreciation & Amortization) - (Capital Expenditures)
- (Changes in Working Capital)
= Free Cash Flow

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13
Q

Formula: Operating Profit Margins?

A

(Operating Profit) / (Sales) = Operating Profit Margin

Note: Sales - COGS - General and Admin Expenses

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14
Q

Formula: Debt to Equity Ratio?

A

(Total Debt) / (Total Equity) = Debt to Equity Ratio

Note:
Total Debt = Current + Long Term Debt
Total Equity = Stockholder’s Equity

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15
Q

Formula: Quick Ratio?

A

(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

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