Financial Management Flashcards
Dividend Yield Formula
Dividends per share/Market price per share
Inventory Turnover Formula
COGS/Average Inventory
How does one calculate NPV?
Take the difference between PV of future cash inflows and the initial cost of the investment
The benefits of debt financing over equity financing are likely to be highest in which of the following situations?
High marginal tax rates and few noninterest tax benefits
EVA formula
EVA = After-tax operating income - (Initial Investment x WACC)
Cost Reorder Point formula
Lead time quanity + Safety Stock
Safety stock formula
(Maximum lead time - avg lead time) x Daily usage
Pursuant to the Sarbanes-Oxley Act of 2002, an accountant who destroys documents to impede an investigation by a U.S. agency can be:
Fined and/or imprisoned for 20 years.
After-tax cost of equity formula
Cost = [(Dividend x (1 + Growth))/ Price per share] + Growth rate
Times Interest Earned Ratio
EBITDA/ Interest Expense
Cost of debt formula
(1- Tax Rate) x Before-tax cost of debt
DIO
Average Inventory/COGS per day
DSO
Average AR/Sales per day
DPO
Average AP/COGS per day
Cash Conversion Cycle
DIO + DSO - DPO
Which of the following methods is best suited for evaluating the performance of a firm’s capital in any given year?
A. IRR
B. NPV
C. EVA
D. Payback
C. EVA
Dividend Yield (Common Stock)
Div Yield = (Cash Dividend per common share/Market Price per share) x 100
Required Rate of Return
RR = RFR + Beta (ERR - RFR)
Which of the following metrics equates the present value of a project’s expected cash inflows to the present value of the project’s expected costs?
IRR
Capital Turnover Ratio
Total Sales/SHE
Residual Income Formula
Operating Income - (target return % x invested capital)
Investment Turnover
Sales/Invested Capital
Cost of Preferred Stock
(% x par value) /net issuance price
ROI Formula
Net Income/Invested Capital
Expected Return
[(Ending price + Dividends)/Opening Price] - 1
The DuPont analysis is affected by what 3 concepts?
Operating efficiency, asset use efficiency and financial leverage
Will the IRR of a project be lower or higher if cash inflows are received later in the life of the project?
Lower - this is because later cash inflows have a lower PV than earlier cash inflows.
Profit Margin x Asset turnover x leverage equals what?
ROE
PV of future inflows - initial investment
Net Present Value
