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BEC - My own > Formula > Flashcards

Formula Flashcards

1
Q

Calculate “Net Initial Outflow”

A

Invoice $ + Shipping $ + Installation$ (outflow)
+ Increase in WC (outflow)
- Cash Proceeds on Sale of old asset (net of tax) (inflow)
__________________________________________
= Net initial outflow

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2
Q

Net Present Value Calculation Steps

A

Step 1: Calculate after tax cash flows

Step 2: Add depreciation benefit

Step 3: Multiply result by appropriate PV of an annuity

Step 4: Subtract initial cash outlfow

Result: Net present value

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3
Q

Profitability Index

A

PV of net future cash inflow
__________________________
PV of net initial investment

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4
Q

Payback Period

A

Initial outflow
__________
Annual annuity

TVM is ignored unless discounted cash flows are used to calculate.

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5
Q

DOL (degree operating leverage)

A

% change in EBIT
_______________
% change in Sales

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6
Q

DFL (degree financial leverage)

A

% change in EPS
_______________
% change in EBIT

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7
Q

Combined (total) Leverage

A

= DOL * DFL

= (% change in EPS) / (% change in Sales)

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8
Q

Cost of Debt

A

interest rate * (1 - tax rate)

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9
Q

Cost of Retained Earnings Methods (3)

A
  1. CAPM
  2. DCF
  3. BYRP
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10
Q

Calculate Cost of Retained Earnings - CAPM

A

C = R + B (M- R)

C : cost of equity capital
R : Risk free rate
B : Beta efficiency
M : Market rate of return

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11
Q

Calculate Cost of Retained Earnings - DCF

A

Cost R = ( Dividend Y1/ Price of stock ) + g

g : constant rate of growth of dividend.

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12
Q

Calculate Cost of Retained Earnings - BYRP

A

cost RE = pretax cost of debt + Risk premium

Pretax cost of debt : YTM rate
Risk premium = B( Market - Rfr )

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13
Q

Return on Investment (ROI)

A

Income
________

Investment Capital (average assets)

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14
Q

Return on Assets (ROA)

A

Net income
__________
Average total assets

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15
Q

Required Return

A

Investment * Cost of Capital

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16
Q

Residual Income

A

Net Income - Required return

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17
Q

Economic Value Added

A

Income after taxes - Required Return

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18
Q

What does the Debt-to-equity ratio tell you?

A

The lower the ratio, the lower the risk.

total debt/ total shareholders equity

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19
Q

Net Working Capital

A

CA-CL

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20
Q

Current Ratio

A

Current Assets
_____________
Current Liabilities

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21
Q

Quick Ratio

A

Cash + MKT Securities + Receivables
________________________________

Current Liabilities

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22
Q

APR of Quick Payment Discount

A

[ 360 / (Pay Period - Discount Period)] x [Discount /(100-Discount %)]

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23
Q

Inventory Turnover

A

COGS
____________

Average Inventory

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24
Q

Inventory Conversion Period

A

365
_______________

Inventory Turnover

= Avg inventory / (Avg COGS / 365)

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25
Q

A/R Turnover

A

Sales
__________
Average A/R

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26
Q

A/R Collection Period

A

365
_____________

A/R Turnover

= Avg AR / (Avg sale per day)

27
Q

A/P Turnover

A

COGS
_________

Average A/P

28
Q

A/P Deferral Period

A

365
_______

A/P Turnover

= Avg AP / ( COGS per day)

29
Q

Economic Order Quantity (EOQ)

A

√((2 x Annual Sales x Order Cost)/(Carrying Cost per Unit))

“2SOC”

30
Q

Investment Turnover

A

Sale
______________
Avg Investment

31
Q

Cash conversion cycle

A

Inv conversion period + Rec. collection period - Payable deferral period

32
Q

Reorder point

A

Safety stock + ( Lead time x sale during lead time)

33
Q

Risk Premium

A

Market Rate - Risk Free Rate

34
Q

EPS

A

NI / # shares O.S

35
Q

Debt to Equity Ratio

A

Total Liabilities / Total SE

36
Q

Owner’s equity Ratio

A

SE/ Total Asset

37
Q

Debt Ratio

A

TL/TA

38
Q

Capital turnover

A

= Annual Sales(revenue ) /Avg.Owner’s Equity

39
Q

Number of days supply inventory

A

= 365/ Inventory TO

40
Q

DuPont Formula

A

= ROS X Assets TO

Where ROS = Net Sales / Net Income
Assets TO = Sales / Total Assets

41
Q

Real interest Rate (RIR)

A

= Nominal interest rate – Inflation Rate

42
Q

Margin of Safety

A

MOS ($) = Total sale - BE sale

MOS (%) = MOS $ / Total Sale

43
Q

Cost of preferred stock

A

= ($) Outflow / Net inflow

= Dividend / (net proceed - flotation cost)

44
Q

Profit margin

A

= Net income / Sale

= ROI / Asset turnover

45
Q

Times interest earned

A

= EBIT ** / Interest expense

**Add back depreciation n interest to get to PRE-tax income

46
Q

Real GDP

A

= Norminal GDP / GDP deflator x 100

47
Q

Real GDP per capita

A

= Real GPD / population

48
Q

Multiplier effect

A

= 1/ (1-MPC)

MPC + MPS = 1

Change in GPD = multiplier x change in spending

49
Q

Inflation rate (%)

A

= CPI this period - CPI last period / CPI last period

50
Q

Norminal interest rate

A

= Real interest rate + Inflation rate

51
Q

Elasticity of supply & Demand - point method

A

Ep = change in QD% / Change in P %

= ( Q2 - Q1 / Q1 ) / (P2 - P1) / P1

52
Q

Elasticity of supply & Demand - midpoint method

A

= ( Q2 - Q1 / Q1+ Q2 ) / (P2 - P1 / P1 + P2)

53
Q

Cross elasticity

A

= % change in # of unit X / % change in price of Y

Positive Px increase and Dy increase : X & Y are substitute
Negative : Px increase and Dy decrease: X & Y are compliment

54
Q

Income elasticity

A

= % change in demand / % change in income

55
Q

Marginal product (Labor)

A

= change in total product / change in labor

56
Q

Avg product

A

AP(L) = TP / L

57
Q

Avg Fixed cost

A

AFC = FC / Quantity

58
Q

Avg Variable cost

A

AVC = VC / Quantity

59
Q

Avg total cost

A

ATC = TC / Q = AFC + AVC

60
Q

Marginal cost

A

MC = Change in TC / Change in Quantity

MC depend solely on VC
FC do not influence MC

61
Q

ARR =

A

Avg. Annual incremental Revenues – Avg. Annual incremental expenses / Initial (or avg) investment

62
Q

The formula for developing the overhead is

A

Estimated total overhead costs/ Estimated activity volume = predetermine rate

Applied overhead = Predetermine overhead rate x actual number of units used ( direct labor hours or machine hours )

63
Q

APR =

A

Interest (cost)
APR = ________________________
Principal x Time fraction of year

64
Q

Effective annual interest rate

A

= ( 1+ (stated rate/n) )^n - 1

BEC - My own (11 decks)

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