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FA and Equity Flashcards

1
Q

Out of equity method, proprotionate consolidation and acquisition method which has the higher Net Profit Margin, ROE and ROA

A

Equity method for all and proportionate consolidation and Equity for ROE. Proportionate is between for all others

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2
Q

Using the current rate method, when is the value of the net assets and net liabilities gaining

A

The net assets gain when the local currency appreciates and the net liabilities when the currency is depreciating

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3
Q

Using the temporal rate method, when is the value of the net monetary assets and net monetary liabilities gaining?

A

The net monetary assets gain when the local currency appreciates, and net monetary liabilities when the currency depreciates

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4
Q

How are monetary assets and liabilities measured using the temporal method?

A

Temporal method - current rate

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5
Q

How are monetary assets and liabilities measured using the current rate method?

A

Current Rate method - current rate

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6
Q

How are nonmonetary assets and liabilities measured using the temporal method?

A

Temporal method - historical rate

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7
Q

How are nonmonetary assets and liabilities measured using the current rate method?

A

Current Rate method - current rate

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8
Q

How is common stock measured using the temporal method?

A

Temporal method - historical rate

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9
Q

How is common stock measured using the current rate method?

A

Current Rate method - historical rate

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10
Q

How is equity measured using the temporal method?

A

Temporal method - Mix (average and historical)

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11
Q

How are Revenues and SG&A measured using the temporal method?

A

Temporal method - Average Rate

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12
Q

How is the cost of goods sold measured using the temporal method?

A

Temporal method - Historical Rate

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13
Q

How are depreciation and amortization measured using the temporal method?

A

Temporal method - Historical Rate

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14
Q

How is net income measured using the temporal method?

A

Temporal method - Mixed rate (average and historical rate) - based on previous values in income statement

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15
Q

Where is exchange rate gain or loss measured using the temporal method?

A

Temporal method - Income Statement

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16
Q

Where is exposure measured using the temporal method?

A

Temporal method - Net Monetary assets

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17
Q

How is equity measured using the current rate method?

A

Current Rate method - current rate

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18
Q

How are Revenues and SG&A measured using the current rate method?

A

Current Rate method - Average Rate

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19
Q

How is the cost of goods sold measured using the current rate method?

A

Current Rate method - Average Rate

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20
Q

How are depreciation and amortization measured using the current rate method?

A

Current Rate method - Average Rate

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21
Q

How is net income measured using the current rate method?

A

Current Rate method - Average Rate

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22
Q

Where is exchange rate gain or loss measured using the current rate method?

A

Current Rate method - Equity

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23
Q

Where is exposure measured using the current rate method?

A

Current Rate method - Net Assets

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24
Q

What is the FCFE coverage ratio

A

FCFE / (dividends + share repurchase)

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25
What is the formula for FCFE from CFO
CFO - FCInv + net borrowing
26
What is the gordon growth model?
D1/V0 + g
27
What is Equity Return Premium (ERP) using dividend yield?
ERP = E(dividend yield) + g - rf
28
What is Grinold-Kroner model
It is used to express the expected market equity return = [DY + changeP/E + expected inflation + real economic growth rate - change shares outstanding] - rf
29
What is the Dividend Discount Model (DDM) that starts with re
re = DY + CGY
30
What is the expanded CAPM for private companies
Required return = rf + Bpeer x ERP + Size Premium + Firm Specific Premium
31
What are PBO Components rather how do you get from Opening PBO to Closing PBO?
Opening PBO + Service Cost + Interest Cost +/- Actuarial (gains) or losses +/- Past Service Costs - Benefits Paid = Closing PBO
32
What is the Gordon Growth Model
V0 = D0 x (1+g)/(r-g) or D1/(r-g)
33
What is the PV of Growth Opportunities
P0 = E1/r + PVGO
34
What is the H-model?
V0 = [(D0 x (1+gL))/(r-gl)] + (D0 x H x (gs-gl))/(r-gl) where H is the transition period/2 where gl is low growth
35
What is the plain wording of basic ROE?
ROE = (net profit margin) x (asset turnover) x (equity multiplier)
36
What is FCFF with NI
NI + NCC + [int(1-t)] - WCinv - FCinv
37
What is FCFF with CFO
CFO + [int(1-t)] - FCinv
38
What is FCFF for EBIT
FCFF = [EBIT(1-t)} + NCC - WCinv - FCinv
39
What is the FCFE for NI
NI + NCC - WCinv - FCinv + net borrowings
40
What is FCFE for CFO
CFO - FCinv + net borrowings
41
What is the justified P/B ratio
P0/B0 = (ROE-g)/(r-g)
42
What is the justified P/S0 ratio
Justified P/S = ((E/S) x (1-b)(1+g))/(r-g)
43
What is the justified dividend yield D0/P0
D0/P0 = (r-g)/(1+g)
44
For RI what is the PVGo model
P = EPSt/r + PVGO
45
What is the formula for the Intrinsic value of multistage residual income in layman terms?
V0 = B0 + (PV high-growth RI) + PV cont. RI
46
What is justified leading P/E
(1 - b)/(r - g)
47
What is justified trailing P/E
(1 - b)(1 + g)/(r - g)
48
What is the P/CF ratio?
Justified P/CF = (FCFE0 x (1+g))/(r-g)
49
What is the formula for the single stage RI model?
V0 = B0 + [(ROE-r)xB0/(r-g)]
50
What is the breakdown of EVA breaking down NOPAT?
[EBIT x (1 - t)] - $WACC (dollar cost of capital) (Total Capital (LTD and SH Equity)
51
What is the formula for the Intrinsic value of multistage residual income in layman terms?
V0 = B0 + (PV high-growth RI) + PV cont. RI
52
How do you calculate the PV of cont RI
RIT/1+r-w where w is the persistence factor
53
What is the total discount value using DLOC and DLOM?
1 - [(1-DLOC)(1-DLOM)]
54
What is the formula for PEG are we looking for with PEGs
PEG ratio = (P/E)/g Stocks with lower PEGs are more attractive than stocks with higher PEGs
55
What is the formula for NI goodwill?
NI - Prorata Income of BV - prorata excess allocated to PPE
56
How do you find CVA for bond with Probability of Default and LGD
Multiply them together then by the discount factor and you will then add them up
57
What are PBO Components rather how do you get from Opening PBO to Closing PBO?
Opening PBO + Service Cost + Interest Cost - Actuarial gains + Acturial losses + Past Service Costs - Benefits Paid = Closing PBO
58
What is the formula for the ending fair value of the plan?
The ending fair value of plan assets = beginning fair value + contributions + actual return – benefits paid
59
What is book value?
Common Shares + Retained Earnings or total Equity
60
How do you forecast BVPS
BVPSt + E1 - D1
61
What is Market Value of Assets?
MVA = (market value of equity + market value of debt) - (Long-term debt + Common shares + Retained Earnings)
62
What is value of firm from FCFF
FCFF1/(WACC-g)
63
What is value of firm from FCFE
FCFE1/(r-g)
64
What is the value of private firm using EBIT and WACC?
EBIT1(1-T)(1-b)/WACC-g
65
How do you calculate the FFO
NOI + depreciation, amortization, impairments, and write-downs - Gains from sales of property + Losses from sales of property = FFO
66
What is AFFO
FFO (funds from operations) - Non-cash (straight-line) rent adjustment - Recurring maintenance-type capital expenditures and leasing commissions = AFFO
67
What is R2?
SST-SSE/SST or RSS/SST
68
Adjusted R2
1- [((n-1)/(n-k-1)) x (1-R2)]
69
What is the F statsitic
(SSER - SSEu)/q / (SSEu)/(n - k - 1) with q and (n-k-1) degrees of freedom q = number of excluded variables in the restricted model and k = independent variables in the full model
70
What happens when monetary and fiscal policy are both expansionary and both restrictive in high and low capital mobility environments?
In EE and RR with high capital mobility it is uncertain and for low ee will lead to depreciation and rr will lead to appreciation
71
What is the formula for full goodwill considering percent owned?
Full goodwill = (purchase price / % owned) - (fair value of net identifiable assets of the subsidiary)
72
What is the accruals ratio with NI?
(NI - CFO - CFI)/ (NOAend + NOAbeg)/2
73
What is the expanded CAPM for private companies
Required return = rf + Bpeer x ERP + Size Premium + Firm Specific Premium
74
What is the neoclassical growth theory?
Sustainable growth rate is a function of population growth, labor’s share of income, and the rate of technological advancement. * Growth rate in labor productivity driven only by improvement in technology. * Assumes diminishing returns to capital.
75
what is the underwriting ratio
[(claims + change of loss reserves) + cost of investigating claims]/net premium earned
76
What are the two values in the beneish model that are negative
SGAI -Sales general and administrative expense over sales LEVI - Leverage index (total debt/total assets)
77
What are the rationales for share repurchases?
1. Tax advantage to shareholders 2. Signal to shareholders 3. Added flexibility 4. Offsetting Dilution 5. Increase leverage
78
What is the formula for FCInv
end net PPE - beg. net PPE + depreciation +/- loss/(gain) on sale
79
How do we unleaver a beta?
Bpublic / [1 + (1-t)(D/E)]
80
What is the market conversion price
Market price of convertible bond/conversion ratio
81
What is the VT of the long position of the dividend-paying stock using PVD
[St - PVDt] - [FP/(1+Rf)^(T-t)]
82
What is the Forward Price of an equity security
(Spot Price - Present Value of Expected Dividends) x (1 + Rf)^T [S0 x (1+Rf)^T] - FVD
83
What is the formula for the black scholes model for calls?
S0e^(gT)N(d1) - e^(-rT)XN(d2)
84
What is the formula for the black scholes model for puts?
e^(-rT)XN(-d2) - S0e^(-gT)N(-d1)
85
What is the formula for futures price from spot price?
Spot price + Storage costs - Convenience Yield
86
What is the optimal active risk?
std devA = (IR/SRb)std devb
87
The Sharpe ratio of portfolio with optimal level of active risk is?
SRp = sqr rt(SRB^2+IR^2)
88
What is the total risk of the portfolio or std devp?
std devp^2 = std devB^2 + std devA^2
89
What is the IR and value of a constrained portfolio?
IR = TC IC sqr rt(BR) E(RA) = TC IC sqr rt(BR)std devA
90
What is the optimal level of active risk using TC?
std CA = TC (IR/SRB) std devB
91
What are the equilibrium term structure models?
1. The Vasicek Model 2. The Cox-Ingersoll-Ross Model These are both single-factor models
92
General formula for value added of active return? hint add
Sum (change of weights x Expected Benchmark return) + Sum (Portfolio Weights x Active return within asset classes) First part is for active return from asset allocation and then second part is active return from stock selection
93
What is the formula for the optimal aggressiveness from total risk?
IR/SR x Total Risk
94
What is the IC for an active management
IC = 2 (% correct) - 1
95
What is the SR for an active constrained portfolio?
SRp^2 = SRB^2 + (TC)^2 (IR)^2
96
What is the upfront payment for a protection buyer for a CDS?
= (CDS spread − CDS coupon) × duration × notional principal
97
What is the difference between Breusch Pagan and Breusch Godfrey stats?
BP - heteroskedasticity tet BG - for AR models and tests for serial correlation
98
What is the formula for MSE
SSE/n - k - 1
99
What is the Futures Price formula for bonds?
(1/Conversion Factor)[(Clean price + AI0)x(1+Rf)^T - AIC - FVC]

CFA II (3 decks)

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