Formulas Flashcards
Chapter 6: Liquidity analysis: Current Ratio
Current Assets
___________
Current Liabilities
Chapter 6: Liquidity analysis: Quick or Acid Test Ratio
(Current Assets - Inventory)
___________
Current Liabilities
Chapter 6: Leverage Ratios: Debt Ratio
Long Term Debt
___________
Total Assets
Chapter 6: Leverage Ratios: Debt to Equity (or Gearing) Ratio
Long Term Debt
___________
Equity
Chapter 6: Leverage Ratios: Interest Cover
Operating Income
___________
Interest Expense
Chapter 6: Profitability Ratios: Sales to Assets
Sales
___________
Total Assets
Chapter 6: Profitability Ratios: Net Profit Margin
Net Income
___________
Sales
Chapter 6: Profitability Ratios: Return on Assets
Net Income
___________
Total Assets
Chapter 6: Return on Assets (with Sales, Net Income, and Total Assets)
Return on Assets = Sales to Assets X Net Profit Margin
Sales to Assets = Sales / Total Assets
Net Profit Margin = Net Income / Sales
Chapter 6: Return on Equity
Net Income
___________
Equity
Chapter 6: Return on Equity with Return on Assets
Return on Assets X Net Income / Equity
Chapter 6: Inventory Turnover Ratio
Cost of Goods Sold
___________
Inventory
Chapter 6: Payout Ratio
Dividends
___________
Earnings
Chapter 6: Retention Rate
1 - Payout Ratio
Chapter 6: P/E Ratio
Share or Market Price
___________
Earnings
Chapter 6: Market to Book Ratio
Share or Market Price
___________
Book Value
Chapter 6: Dividend Yield
Dividend
______________________
Share or Market Price (last year)
Chapter 8: Future Value
FV = PV ( 1 + i / m ) ^ n * m
Chapter 8: Present Value
PV = FV / ( 1 + i ) ^ n
Chapter 8: Future Value of Annuity
FVA = PMT / i [ ( 1 + i ) ^ n - 1 ]
Chapter 8: Present Value of An Annuity
Look at notes… Cannot type it here.
PVA = PMT / i [ ( 1 + i ) ^ n - 1 / ( 1 + i ) ^ n ]
Chapter 8: Present Value of Perpetuity
PVP (without growth each year forever) = PMT / i
PVP (with growth each year forever) = PMT / i - g
Chapter 8: Rate of Return
R = Capital Gain + Dividend Yield
Capital Gain =
Selling Price - Purchase Price
_________________________
Purchase Price
Dividend Yield =
Cash Dividend
____________
Purchase Price
Chapter 9: Preferred Stock Valuation
Share price =
Dividends
___________________
Required Rate of Return
Chapter 9: Common Stock
Look at notes…
Dividends
_________
(1 + K) ^ n…
Chapter 9: Constant Dividends
Dividends
________
Required Rate of Return
Chapter 9: Dividends with Constant Growth
D ( 1 + g )
________
Return - g
Chapter 9: Dividend with Constant Growth (will pay… future)
Dividend
________
Return - g
Chapter 9: Constant Growth and Dividend Payout Ratio
g = (1 - payout ratio) x Return on Equity g = Retention Rate x Return on Equity
Chapter 13: Sharpe Ratio
(Fund Average Return – Risk Free Return) / Standard Deviation of the Fund
Chapter 13: Alpha
Fund return – [Risk free rate + Beta of fund (Benchmark return – Risk free return)]
Also:
Fund return - CAPM
Chapter 13: Treynor’s Ratio
(Fund Average Return – Risk Free Return) / Beta of the Fund
Chapter 13: Net Asset Value
(Market Value of Assets – Liabilities) / Number of Units
Chapter 12: Nominal Rate
1 + nominal rate = (1 + real rate) * (1 + inflation rate)
Chapter 12: Real Rate
1 + real rate = 1 + nominal rate / 1 + inflation rate
Chapter 12: Return on two asset portfolio
Return of portfolio = weighting 1 x return 1 + weighting 2 x return 2
Chapter 12: CAPM (Overall market)
Return = Rf + Beta (R market - Rf)
Chapter 12: CAPM (Market Premium)
Return = Rf + Beta (Market Premium)
