Formulas Flashcards
[1.3] Times Interest Earned
Times Interest Earned = EBIT ÷ Interest Payment
[2.1] Return on Assets
Return on Assets = Net income ÷ Average Total Assets
ROA=NI/AA
Return on Assets = Return on Equity x (1 - Debt Ratio)
[2.3] Basic Earnings Per Share (BEPS)
Basic Earnings Per Share (BEPS) = income available to common shareholders ÷ Weighted-average number of common shares outstanding
[2.3] Book value per common share
Book value per common share = net assets (equity) attributable for common shareholders ÷ common shares outstanding
[2.3] Dividend Payout Ratio
Dividend Payout Ratio = Dividends to common shareholders ÷ Income available to common shareholders
[2.3] Price-Earnings Ratio (P/E Ratio)
Price Earnings Ratio (P/E Ratio)
= Market price per share ÷ EPS
Price Earnings Ratio (P/E Ratio)
= Market price per share ÷ (Net income available for common shareholders ÷ weighted-average common shares outstanding)
[3.1] AR Turnover
AR Turnover = net credit sales ÷ average accounts receivable
[3.1] AP Turnover
AP Turnover = purchases ÷ average accounts payable
[3.1] Operating Cycle
Operating Cycle = number of days’ sales in inventory + number of days’ sales in receivables
[3.1] Cash cycle
Cash Cycle = operating cycle - days’ purchases in accounts payable
Cash Cycle = number of days’ sales in inventory + number of days’ sales in receivable - days’ purchases in accounts payable
[3.1] Days’ sales outstanding in receivable
Days’ sales outstanding in receivable = Days in year ÷ Accounts receivable turnover
- Lower is better
[3.1] Total Asset Turnover
Total Asset Turnover = Sales ÷ Average Total Assets
TAT=S/AA
[3.1] Working Capital Turnover
Working Capital Turnover = Sales ÷ Average Working Capital
WCT=S/AWC
[7.4] Effective Rate
Effective Rate = Net Cost ÷ Usable Funds
Effective Rate = Annual cost ÷ Usable fund
Effective Rate = Stated rate ÷ (1 - compensating balance percentage)
Effective Rate = Annual net cost ÷ Amount advanced
[7.4] Average Gross Receivable Balance
Average Gross Receivable Balance = Average Daily Sales x Average Collection Period (Days’ Sales Outstanding)
[3.1] Inventory Turnover Ratio
Inventory Turnover = COGS ÷ Average Inventory
[4.1] Conversion Ratio
Conversion Ratio = Par value of the convertible bond ÷ Conversion Price
[5.4] Effective Interest Rate
Effective Interest Rate = Net interest expense ÷ Usable Fund
Effective Interest Rate = Standard Rate ÷ (1.0 - Compensating Balance %)
[5.4] Face amount of a loan with compensating balance, Loan amount needed with compensating balance
Face amount of a loan with compensating balance = Total amount needed ÷ (1.0 - compensating balance %)
= Usable fund ÷ (1 - compensating balance %)
[5.4] Required Rate of Return
Required Rate of Return = Risk-free rate of return + beta(expected rate of return - risk free rate of return)
Required Rate of Return = Rf + b(Rm - Rf)
[5.4] Cost of not taking discount
Cost of not taking discount = [Discount % ÷ (100% - Discount %)] x [Days in year ÷ (Total payment period - Discount Period)]
[5.3] Risk Premium
Risk Premium = Beta x Market Risk Premium
[5] Amount of receivable to be factored
Amount of receivable to be factored = usable fund ÷ advance percentage
[5] Loan amount needed with commercial paper
Loan amount needed with commercial paper = usable fund ÷ price
for example, if 270-day commercial paper priced at 95% of the face amount then it will be calculated as
usable fund ÷ 95%
