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BEC > Formulas & Methods > Flashcards

Formulas & Methods Flashcards

1
Q

WACC

A

WACC = WACC Equity + WACC Debt After Tax

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2
Q

WACC Equity

A

WACC Equity = Cost of Equity % * Equity %

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3
Q

WACC Debt After Tax

A

WACC Debt = Cost of Debt % * Debt % * (1 - Tax %)

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4
Q

Debt to Equity

A

Debt to Equity = Debt / Equity

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5
Q

CAPM
Cost of Equity = Common Stock

A

CAPM = Risk Free Rate + (Beta * (Market Rate - Risk Free Rate)

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6
Q

Discounted Cash Flows (DCF)
Cost of Equity = Common Stock

A

DCF = (Dividend / Price of Stock) + Growth Rate

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7
Q

Bond Yield Plus Risk Premium
Cost of Equity = Common Stock

A

BYPRP = Before Tax Cost of Debt + Risk Premium

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8
Q

Cost of Preferred Stock
Cost of Equity = Preferred Stock

A

Cost of Preferred Stock = Dividends / Net Proceeds

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9
Q

Cost of Debt

A

Cost of Debt = (Interest Expense / Total Debt) * (1 - Tax %)

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10
Q

Return on Sales

A

Return on Sales = Op Profit / Sales (net)

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11
Q

Return on Equity

A

Return on Equity = Net Income / Avg Equity

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12
Q

Return on Assets

A

Return on Assets = Net Income / Avg Assets

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13
Q

Return on Investment

A

Return on Investment = Net Income / Avg Invested Capital

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14
Q

Gross Profit Margin

A

Gross Profit Margin = Gross Profit / Revenue

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15
Q

Operating Profit Margin

A

Operating Profit Margin = Operating Profit / Revenue

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16
Q

Net Profit Margin

A

Net Profit Margin = Net Income / Revenue

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17
Q

EBIDTA Margin

A

EBITDA Margin = EBITDA / Revenue

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18
Q

Residual Income

A

Residual Income = Net Income - (Required Return * Equity)

For Required Return = The question may say WACC, Cost of Equity or Hurdle Rate.
For Equity = The question may say NBV or Investment.

Method =
1. Calculate Actual Return (Equity * Required Return Rate)
2. Residual Income = Net Income - Actual Return

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19
Q

Operating Leverage

A

Operating Leverage = Fixed Expenses / Total Expenses

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20
Q

Financial Leverage

A

Financial Leverage = Avg Assets / Avg Equity

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21
Q

Debt Ratio

A

Debt Ratio = Total Debt / Total Assets

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22
Q

Debt to Total Capital

A

Debt to Total Capital = Total Debt / Total Capital

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23
Q

Times interest Earned
AKA Interest Coverage Ratio!

A

Times Interest Earned = EBIT / Interest Expense

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24
Q

Zero Growth Model or Perpetuitites

A

Zero Growth Model or Perpetuities = Dividends / Required Return
*Absolute model that tells me the price of stock

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25
Q

Dividend Discount Model

A

Gordon Growth Model = Dividends * Growth Rate / (Required Return - Growth Rate)
*Absolute model that tells me the price of stock

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26
Q

Discounted Cash Flows
*Absolute model that tells me the price of stock

A

Discounted Cash Flows = Valuation on DCF / Outstanding shares

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27
Q

Price to Earnings (PE)
*Tells me how many times I’m paying for the stock

A

PE = FMV / EPS

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28
Q

Price to Earnings Growth (PEG)
*Tells me how many times I’m paying for the stock but considers company growth

A

PEG = PE / Expected Growth Rate

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29
Q

Price to Sales (PS)

A

PS = FMV / Expected Sales per Share
*Tells me how sales compare to the mkt price

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30
Q

Price to Cash Flows (PCF)

A

PCF = FMV / CF
As an investor, I want it to be high.

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31
Q

Price to Book (PB)

A

PB = FMV / NBV of Equity

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32
Q

Net Present Value

A

NPV = PV of Future CF - Upfront Investment

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33
Q

Profitability Index

A

Profitability Index = PV of Future CF / Upfront Investment

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34
Q

Payback Period

A

Payback Period = Initial Investment / Annual CF

*For partial years :
Cash needed / Period CF

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35
Q

Discounted Payback Period

A

Discounted Payback Period = Initial Investment / Discounted Annual CF

*For partial years :
Cash needed / Period CF

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36
Q

Economic Value Added

A

EVA = NOPAT - Required Return*

Required Return = WACC * Op Assets

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37
Q

Internal Rate of Return

A

IRR = When NPV is zero.

Must be > Required Return

38
Q

Working Capital Turnover

A

WCTO = Sales, net / Avg Working Cap

39
Q

APR of Quick Payment Discount

A

APR = (360 / (Pay Period - Disc Period)) * (Disc% / 1 - Disc %)

40
Q

Economic Order Quantity

A

EOQ = SQRT (2SO / C)

*Tells me the optimal order size

S = Annual Sales
O = Cost per PO
C = Carrying costs per unit

41
Q

Reorder Point

A

Reorder Point = Safety Stock + (Lead Time * Sales during Lead Time)

  • Safety Stock tells me the amt of inventory I need to have to not sell out, and Reorder Point tells me when I need to reorder to avoid loss of being sold out.
  • Lead time is the amount required to deliver goods to costumers.
42
Q

Cost of Goods Manufactured

A

Total Mfg Costs
(+) Beg WIP
(-) End WIP
(=) COGM

43
Q

COGS

A

COGM
(+) Beg FG
(-) End FG
(=) COGS

44
Q

Absorption Costing

A

Revenues
(-) COGS
(=) Gross Profit
(-) Variable SG&A
(-) Fixed SG&A
(=) Net Income

  • Assigns fixed and variable DM, DL, and a portion of OH to inventory.
    ** Split between product and period costs.
    *** GAAP
45
Q

Variable Costing

A

Revenues
(-) Variable COGS
(-) Variable SG&A
(=) Contribution Margin
(-) Fixed OH
(-) Fixed SG&A
(=) Net Income

  • Assigns variable DM, DL, OH to inventory.
    ** Applies only to product costs.
    *** Fixed OH is period cost.
    ** NOT GAAP
46
Q

Traditional Costing

A

OH Cost = OH rate * Cost Driver for Product

OH Rate = Total Costs / Cost Driver

47
Q

Activity Based Costing

A
48
Q

Joint Product Costing

A

It’s just an allocation, based on whatever the MCQ/SIM says.

49
Q

DM Price Variance

A

DM Price Variance = Actual Units * (Budg Price - Actual Price)

50
Q

DM Usage Variance

A

DM Usage Variance = Budg Cost * (Budg Units - Actual Units)

51
Q

DL Rate Variance

A

DL Rate Variance = Actual Hrs * (Budg Rate - Actual Rate)

52
Q

DL Efficiency Variance

A

DL Efficiency Variance = (Actual Hrs * Std Rate) - (Std Hrs * Std Rate)

53
Q

Variable Spending OH Variance

A

Variable Spending OH Variance = Actual Hrs * (Budg Rate - Actual Rate)

54
Q

Variable Efficiency OH Variance

A

Variable Efficiency OH Variance = Budg Rate * (Budg Hrs - Actual Hrs)

55
Q

Fixed Spending OH Variance

A

Fixed Spending OH Variance = (Actual Hrs * Actual Rate) - (Actual Hrs * Std Rate)

56
Q

Fixed Efficiency OH Variance

A

Fixed Efficiency OH Variance = (Std Hrs * Std Rate) - (Actual Hrs * Std Rate)

57
Q

Sales Volume Variance

A

Sales Volume Variance = Contribution Margin * (Actual Units Sold - Budg Units Sold)

58
Q

Sales Price Variance

A

Sales Price Variance = Actual Units * (Budg Units - Actual Units)

59
Q

Make or Buy?

A
  1. Compare what it would cost you to have it made + Fixed Costs to your n normal costs.
  2. If you have income, net it against the additional cost.
60
Q

Special Order?

A
  1. Ck if we have capacity = Total Capacity - Current Production
  2. If we have capacity, then add DM + DL + Other costs, except Fixed.
61
Q

Production Budget

A

Budg Sales or Planned Production
(+) Desired End Inventory
(-) Beg Inventory
(=) Production Budget

62
Q

DM Usage Budget

A

Beg Inv
(+) Purchases
(-) End Inventory
(=) DM Usage Budget

Same as COGS formula

63
Q

DL Budget

A

Production Budget or Sales Budget
() Hrs per unit
() Hrly Rate
(=) Total Wages

64
Q

OH Budget

A

Same as COGM!

65
Q

Cash Budget

A

Beg Cash
(+) Cash Collections
(-) Cash Payments
(-) Cash Required
(=) End Cash

66
Q

Financing Budget

A

End Cash
(+) Loans
(-) Loan Repayments
(-) Interest Payments
(=) Financing Budget

67
Q

Coefficient of determination

A

r^2

68
Q

Coefficient of Correlation

A

r
-1.0 = Perfect Inverse correlation \ >units >cost
0.0 = No correlation
1.0 = Perfect correlation / >units <cost

Perfectly correlated = //
Positively correlated |/
Perfectly negatively correlated = X Least Risk
Negatively correlated = |\

69
Q

Regression Model

A

y = a + Bx

y is Total Cost or Dependent Variable
a is fixed cost
B is variable cost
x is total activity or Independent Variable

70
Q

Sensitivity Analysis

A

Compare Overestimated (<100%), projected, and overestimated (>100%)

71
Q

Scenario Analysis

A

Sum of likelihoods * regressions or progressions.

72
Q

Breakeven Point in Units

A

Total Fixed Costs / Contribution Margin per Unit

73
Q

Breakeven Point in Sales

A

Selling Price per Unit * Breakeven Point in Units

74
Q

Pretax Profit

A

Desired After Tax Profit / (1-Tax)

75
Q

Sales Units Needed to Achieve Target Profit

A

(Fixed Costs + Pretax Profit) / Contribution Margin per Unit

76
Q

Margin of Safety

A

Sales
(-) Breakeven Sales

77
Q

Margin of Safety Ratio

A

Margin of Safety / Total Sales

78
Q

Target Cost

A

Planned Selling Price - Desired Profit

79
Q

Expected Monetary Value

A

Risk Cost * Risk Probability %

80
Q

Interest Rate of a T-Bill

A

RF rate + Inflation Premium

81
Q

Real GDP

A

(Nominal GDP / GDP Deflator) * 100

*** For YoY Change = (Real GDP PY / Real GDP CY) - 1

82
Q

Multiplier Effect

A

1 / (Marginal Propensity to Save)

83
Q

Price Elasticity of Demand

A

% Change in Quantity Demanded / % Change in the Price Point

84
Q

Price Elasticity of Supply

A

% Change in Quantity Supplied / % Change in the Price Point

85
Q

Cross Elasticity of Demand/Supply

A

% Change in Qty Demanded/Supplied of Prod A / % Change in Price of Prod B

86
Q

Income Elasticity of Demand

A

% Change in Qty Demanded / % Change in Income Level

87
Q

Partial Productivity Ratio

A

Qty of Output / Qty of Input

88
Q

How to get Valuation of Equity?

A

PE Ratio * Net Income

89
Q

Dividend Discount Model

A

D1 / R - G

90
Q

Total Factor Productivity

A

Qty of Output / Cost of Input

91
Q

Average AR

A

Annual Sales / (360 / Avg Collection Period)

BEC (8 decks)

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