J10/AF4

Question 1

Nominal Stock

Answer 1

Investment Amount / (clean price / 100) x coupon

gross income from bond

Question 2

Net income yield

Answer 2

Gross Income - tax / amount invested x 100

Question 3

Annual interest

Answer 3

Amount invested x AER

Question 4

EPS

Answer 4

Profit ordinary Shareholders / No. ordinary shares

What was made in the year and what could have been given as dividends after everyone else paid

Question 5

Dividend yield (income)

Answer 5

Net dividend per share / current share price x 100

Dividend compared to current share price. Compare asset classes

Question 6

Dividend Cover (Income)

Answer 6

EPS / Dividend per share

Covering dividend with EPS. HOw many time declared dividend could be paid - sustainability

Question 7

Payout ratio (Income) - Reverse dividend cover

Answer 7

Dividend per share / EPS

% of profit that has been distributed

Question 8

P/E Ratio (Growth)

Answer 8

Current market price / EPS

Current price vs historic earnings. Number only. Same sector. No. years to get share price back if company made same EPS each year and gave that money out

Question 9

PEG Ratio (Growth)

Answer 9

PE Ratio / Earnings growth %

Need PE ratio & EPS first. Anticipated earnings growth - potential value. Assumption/forecast. Earnings grow a decimal.

Question 10

NAV (risk)

Answer 10

Net assets ordinary shareholders / No. ordinary shares

Net assets = Assets - liabilities - pref shares
Ordinary s/h chance of getting money back.

Question 11

Gearing ratio

Answer 11

Long term loans + pref shares / total equity - pref shares (ordinary shares)

Proportion of share capital being leveraged

Question 12

Current Ratio (Working capital)

Answer 12

Current assets / current liabilities

Cash flow. Enough cash to pay back liabilities. Don’t want too high as need money working. 1.5-2 good

Question 13

Liquidity ratio (quick or acid test)

Answer 13

Current assets - stock / current liabilities

More cautious than current ratio. Should be at least 1. Business need cash/capital available

Question 14

Return on equity (net)

Answer 14

Net profit after tax + pref dividends / capital & reserves (s/h funds)

Net income / equity capital.
Actual profit as % money invested. After tax

Question 15

Return on capital employed (b4 tax)

Answer 15

Profit before interest & tax / capital employed (s/h funds + long-term debt)

Capital employed = ordinary s/h funds + long-term debt
Profit compared to all capital

Question 16

MWR

HPR adjusted for cash inflows/outflows. Money added then subtracted from numerator. Money withdrawn is added to numerator. Opposite on denominator. Can’t compare managers as strongly influenced by timing of cash flows

Answer 16

D + V1 - V0 - C / V0 + (C x n / 12)

D = Income 
V1 = Price on selling
V0 = Price on acquisition
n = number of months remaining in year
C = new money introduced in the year

Question 17

HPR

Answer 17

D + V1 - V0 / V0

Question 18

TWR

Subperiods. Eliminates distortions caused by new cash flows so can compare managers. Change in value for each subperiod.

Answer 18

1 + R = (1 + r1)(1 + r2)(1 + r3)

Question 19

Modified duration

Probable change in IR changed 1%

Answer 19

Duration / (1 + GRY)

GRY as a decimal. Sensitivity to IR changes.

Question 20

Regular Savings FV

Answer 20

FV = PV[(1 + r)n - 1 / r]