Financial Statements Flashcards
Working Capital =
Current Assets - Current Liabilities
Return on Equity =
Net Income / Shareholders’ Equity
Compounded Annual Growth Rate =
((EV/BV)^1/n) - 1
EV Ending Value
BV Beginning Value
Retention Rate =
(Net Income - Dividends - Share Buybacks) / Net Income
Fundamental Growth =
Return on Equity x Retention Rate
Fundamental Growth =
Return on Equity x Retention Rate
Invested Capital (Financing Approach) =
Book Value of Equity + Book Value of Debt - Cash
Invested Capital (Operating Approach) =
Net Working Capital + PP&E + Goodwill & Intangibles
Reinvestment Rate =
(Net capital expenditures + Change in non-cash working capital ) / NOPAT.
Net Capex = (Capital Expenditures - Depreciation)
sales-to-capital ratio (S/C) =
Revenue / Invested Capital
Invested Capital = ( Book Value of Equity + Book Value of Debt - Cash)
Terminal Value in year n =
With FCFFn
(FCFFn (1+g)) / (r-g)
FCFF = Free Cash Flow to the Firm
g = Growth Rate
r = Cost of Capital
Reinvestment Rate =
With ROIC
Growth Rate / ROIC
WACC =
(((E / (D+E)) x re) + ((( D / (D+E)) x rd x (1-T)))
Growth =
(EV/BV) - 1
EV= Ending Value
BV= Beginning Value
Terminal value in Year n =
With NOPATn
(NOPATn x (1+g) x (1-(g/ROIC))) / (r-g)
g = Growth rate
ROIC = Return on Invested Capital
R = Cost of Capital
Present Value =
FV / (1+r)^ n
FV= Future Value
PV= Present Value
r = Discount rate
n = Number of Periods
Re =
Rrf + ( B x ( Rm - Rrf)
Re= Cost of Equity
Rrf = Risk-Free Rate
B= Beta of the asset
Rm = Market rate of return
Market Risk Premium =
Expected Return on Stocks - Expected Return on Risk-Free Bonds
Equity Risk Premium =
Mature Market Premium + Country Risk Premium
Degree in Operating Leverage =
% Change in Operating Income / % Change in Revenue
Unlevered Beta =
LB / ( 1 + ((1-T) x (D/E)) )
LB = Levered Beta
T = Tax rate
D = Market Value of Debt
E = Market Value of Equity
Levered Beta =
UL x ( 1 + ((1-T) x (D/E)) )
UL = Unlevered Beta
T = Tax Rate
D = Market Value of Debt
E = Market Value of Equity
Market Value of Debt =
C x [ ( 1 - (1/((1+ Rd) ^ n))) / Rd ]+ [D / ( 1+Rd)^n]
C = Interest Expenses
Rd= Pre-Tax Cost of Debt
D = Book Value of Debt
n = Number of Years till Maturity
Pre-Tax Cost of Debt =
Risk-Free Rate + Credit Spread
