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Frank 79 > Formulas > Flashcards

Formulas Flashcards

1
Q

Balance Sheet

A

Total Assets = Total Liabilities + Shareholder Equity

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2
Q

Working Capital

A

Current Assets – Current Liabilities

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3
Q

Current Ratio

A

Current Assets / Current Liabilities

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4
Q

Quick Ratio

A

(Cash + Cash Equv + Accts Receivable) / Current Liabilities

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5
Q

Book Value

A

Total Assets –Total Liabilities

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6
Q

Tangible Book Value

A

Total Assets – Total Liabilities – Intangible Assets – Goodwill

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7
Q

Debt to Total Capital Ratio

A

Total Debt / Total Capital –use either book or market value

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8
Q

Debt to Equity Ratio

A

Total Debt / Total Shareholder Equity

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9
Q

Common Shareholder Equity

A

Total Shareholder Equity – Preferred Shareholder Equity

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10
Q

Days Sales Outstanding

A

(Accts Receivable/Total Credit Sales) x No of Days

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11
Q

Interest Coverage Ratio

A

EBITDA / Interest Expense

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12
Q

Debt to EBITDA Ratio

A

(Short and Long Term Debt) / EBITDA

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13
Q

Accounts Receivable Turnover

A

Sales on Credit (current year) / Average Acct Receivable

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14
Q

Inventory Turnover Rate

A

COGS / Average Inventory

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15
Q

Operating Income (EBIT)

A

Operating profit +/– other income or expenses

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16
Q

Net income

A

Operating profit – interest – taxes

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17
Q

Earnings Available to Common

A

Net income – preferred dividends

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18
Q

Basic EPS

A

Earnings Avail to Common / Avge Common Shares Outstanding

net income – preferred) / (common – treasury

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19
Q

Return on Equity

A

Earnings Avail to Common / Avge Common Shareholder Equity

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20
Q

EBITDA Margin

A

EBITDA / Sales or Revenue

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21
Q

Return on Assets

A

Net Income / Average Assets

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22
Q

PEG (P/E to Growth) Ratio

A

P/E Ratio / Annual Growth Rate

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23
Q

Dividend Yield

A

Annual Dividend / Market Price of Common

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24
Q

Dividend Payout Ratio

A

Annual Dividend / EPS

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25
Q

Earnings Yield

A

EPS / Market Price of Common

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26
Q

Price to Book Ratio

A

Market Price of Common / Book Value

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27
Q

Price to FCF

A

Market Price of Common / FCF per share

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28
Q

Free Cash Flow Yield

A

FCF per share / Market Price of Common

29
Q

Price to Sales Ratio

A

Market Price of Common / Sales or Revenue

30
Q

Enterprise Value

A

Market Cap Common and Pref + Debt + Capital Leases + Minority Interests – cash and equivalents

31
Q

After Tax Cost of Debt (WACC)

A

Pretax Cost x (1 – Tax Rate)

32
Q

Cost of Equity (CAPM) Capital Asset Pricing Model

A

Risk Free RoR + ß (Market RoR – Risk Free RoR)

33
Q

Risk Premium

A

Market RoR – Risk Free RoR

34
Q

Gordon Growth Model

A

Value of Company Share Price = Next period dividend / (equity cost of capital minus growth rate)

35
Q

WACC

A

(Cost of Equity x Weight of Equity) + (Cost of Debt x Weight of Debt)

36
Q

FCFF (free cash flow to firm)

A

EBIT x (1 – Tax Rate) + DepAmort – CapEx +/– change to working capital

37
Q

FCFE

A

Net income + DepAmort – CapEx +/– change to working capital

38
Q

Financial metric for financial service companies:

A

Price / Book

39
Q

Financial metric for REITs

A

Price / Funds from Operations

40
Q

Financial metric for Cyclical Companies

A

Normalised or relative P/E

41
Q

Financial metric for companies with negative earnings or retail companies with same leverage

A

Price / Sales ratio

42
Q

Financial metric for companies with negative earnings

A

Earnings yield

43
Q

Financial metric for basic/heavy industries

A

EV / EBITDA

44
Q

Financial metric for retail companies with different leverage

A

EV / Sales

45
Q

Financial metric for companies with high P/E ratios

A

PEG ratio

46
Q

Which tax rate should be used in adjustment calculations?

A

Always use marginal rather than the effective rate – it’s more conservative

47
Q

Formula for current target share price?

A

FCFE / (Expected RoR – Expected Growth Rate)

48
Q

Comparisons for price of IPO or acquisition?

A

IPO: comparable company, sum of parts, DCF
Acq: comparable transaction

49
Q

Estimate CAGR

A

Calculate growth from every period, compute average, test a value that’s slightly lower

50
Q

Calculation of growth rate

A

Use Rule of 72 – divide 72 by no. of years for funds to double to get annual growth rate

51
Q

Simple present value under DCF

A

Period 1 earnings / (1+Wacc) PLUS
Period n earnings / (1+Wacc)^n PLUS
Terminal value / same as final period

52
Q

Calculate Projected Growth Rate:

A

(NTM Net Income / LTM Net Income) – 1

53
Q

If there’s no debt, what’s the relationship between FCFF and FCFE?

A

They’re the same

54
Q

P/E ration is based on adjusted or unadjusted EPS?

A

Adjusted – extraordinary charges are added back in

55
Q

Treasury Method of adjusting EV

A

Assume valuable options are exercised, company uses proceeds to purchase shares in open market, issues or uses Treasury stock to make up the balance

56
Q

Transaction multiple on EBITDA gives…

A

Enterprise value – subtract the debt and add the cash to get to equity value

57
Q

Relationship of Operating Income to EBITDA?

A

Operating Income has depreciation taken out, so add it back in, along with amortization of intangibles.
Do NOT add in amortization of bond premiums or deferred financing fees

58
Q

Growth rate (if you have PEG)?

A

(P/E) / PEG

59
Q

Crucial factor in calculating FCF?

A

Remember changes in working capital (current assets minus current liabilities)

60
Q

Treatment of Preferred when calculating EV?

A

Use market value

61
Q

How do you calculate how much debt a company can take on?

A

Do a DCF on the cash flows for the period, using after-tax cost of debt as the discount rate

62
Q

What does deteriorating working capital mean?

A

An increase in non-cash working capital, which ties up cash, causing cashflows to reduce, and under DCF, reducing valuation

63
Q

Levered beta

A

Levered beta = unlevered beta x (1 + [(1 - tax rate) x (debt/equity)])

64
Q

What does a reduction in current assets do to operating cashflows?

A

Increases them

65
Q

Stable growth FCFF model?

A

FCFF / (WACC – growth rate)

66
Q

Return on Common Equity?

A

(Net Income - Preferred Dividends) / Common Stockholders’ Equity

67
Q

Goodwill created?

A

Offer value less net tangible assets

68
Q

Implied value?

A

Expected dividend / (cost of capital minus growth rate)

Frank 79 (4 decks)

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