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BEC Created > Financial Management > Flashcards

Financial Management Flashcards

0
Q

What is the formula for the PV?

A

PV= FV/(1+R)^# Yr

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1
Q

What’s the formula for the cost of debt capital after tax?

A

Pretax Cost x (1-tax rate)

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2
Q

In computing the FV, an annuity due earned one more period of interest than ordinary annuity.

A

TRUE

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3
Q

The present value of an amount is less than the future amount.

A

True

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4
Q

Formula for Effective interest rate is?

A

The cost of borrowing/Funds available for use

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5
Q

What’s the formula for Real Interest Rate?

A

Real Interest = stated rate - Inflation rate

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6
Q

Annualized effective interest rate without compounding on a borrowing that is for a fraction of year is called?

A

Annual Percentage Rate

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7
Q

Formula for APR

A

APR = Effective interest rate for fraction of year x number of fractions in year

Fractions:
semi annual
Quarterly

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8
Q

Formula for CAPM

A

RR = RFR + B(ERR - RFR)

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9
Q

Formula for Capitalized Value is

A

Capitalized Value = Expected Earnings/[Discount Rate - (Growth Rate + Inflation Rate)]

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10
Q

The process for value a business are:

A
  1. Establishing standard and premise of valuation
  2. Assessment of the economic environment of the business
  3. Analysis of financial statement
  4. Formulation of valuation
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11
Q

Name the income approaches in business valuation:

A
  1. Discounted cash flows
  2. Capitalization of earnings
  3. Multiples
  4. Free cash flow
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12
Q

What is the formula for Capitalized value

A

Capitalized value = Expected Earnings/[Discount Rate - ( Growth Rate + Inflation)]

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13
Q

Formula for Enterprise multiples

A

EV/EBITDA

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14
Q

Payback formula

A

Payback = investment cost/ annual cash savings

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15
Q

Formula for Accounting Rate of Return

A

ARR= (Average Annual Incremental Revenues - Average Annual Incremental Expenses) / Initial (or average) Investment

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16
Q

What’s the formula for IRR

A

PV factor = Investment cost/ Annual Cash Inflow (or Savings)

17
Q

Formula for PI (Profitability Index)

A

PI = NPV of project inflows/project cost

18
Q

Formula for Sharpe Ratio

A

SR = (Avg. Rate of Return - Risk Free Rate)/SD

19
Q

The discounted payback period approach takes the time value of money into account

A

True

20
Q

NPV approach considers the entire life and results of the project

A

True

21
Q

What are the 3 income approach

A
  1. Discounted cash flows
  2. Option pricing models
  3. Earnings Capitalization
22
Q

What are the financial valuation approaches?

A

Market approach
Income Approach
Cost Approach

23
Q

What are the business valuation approaches?

A

Market approach
Income approach
Asset approach

24
Q

What are the income approaches for business valuation?

A

Discounted cash flows
Capitalization of earning
Multiples
Free cash flow

25
Q

What’s simple Capitalized Value formula for business valuation?

A

CV = Earning/RR

26
Q

What’s business valuation Complex Capitalized Value formula?

A

CV = Expected Earning/[Discount Rate - (Growth Rate + Inflation)]

27
Q

What’s the formula for APR when not taking advantage of discount?

A

APR = discount lost/Principal x 1/Fraction of year

Ex: discount 2/10 bet 30

APR = .02/.98 x 1/(20/360) = 36.73%

28
Q

What’s the formula for Current Yield?

A

CY = Annual coupon interest($)/Current Market Price

29
Q

What’s the formula for Preferred Stock Value?

A

PSV = Annual Dividend/Required Rate if Return

30
Q

What the formula for Preferred Stock Expected Rate if Return?

A

PSERR = Annual Dividend/Market Price

31
Q

What’s the formula for Cost of Capital of new issue share?

A

Cost of Capital = Annual Dividend (which is par value x dividend rate)/ Net proceeds per share (Which is Sale price - Cost per share issue)

32
Q

What’s the formula for current value of Common Stock

A

Dividend/Required Rate Return - Growth Rate

33
Q

Formula for Historic Rate of Return

A

(Dividends + Change in Price)/ Beginning Price

34
Q

Formula for Common Stock Expected Rate if Return

A

(Dividend/Market Price) + Growth Rate

35
Q

Formula for Effective Cost of Debt

A

It’s Interest Cost x (1-tax rate)

36
Q

Formula for Total Order Cost

A

Total Order Cost = # of orders x Per order cost

= (Total units for period/Order Size) x per order cost

37
Q

Formula for Total Carrying Cost

A

Total Carrying Cost = Avg. Inventory x Per unit carrying cost

Avg. Inventory = Order Size/2

38
Q

Formula for Total Inventory Cost

A

Total Inventory Cost = Total Order Cost + Total Carrying Cost

39
Q

Formula for Economic Order Quantity

A

EOQ = SQR 2TO/2

Or

SQR 2xAnnual Demand x Cost per order/ Carrying cost per unit

40
Q

Formula for Reorder Point

A

RP = Delivery time stock + Safety Stock

BEC Created (7 decks)

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