Valuation Formulas Flashcards
AR turnover
Sales / AR
Avg annual growth rate (AAGR)
{Sum all periods sales [( CY sales / PY sales) - 1 ] / # of periods analyzed} x 100
Avg collection period
365/AR turnover
CAGR
{[CY sales / base year sales)(1/# of periods analyzed)]-1}x100
current ratio
Current assets / current liabilities
Debt free working capital turnover
Sales / debt free working capital
Div pay out ratio
Div paid / net income
DuPont Formula
NI / Equity = (NI / Sales)x(sales/assets)x(assets/equity)
EVA Formula
EVA=NOPAT - $ WACC
EVA = EBIT x (1-t) - WACC x capital invested
EVA = (equity) x (ROE-Ke)
Fixed Charge Coverage
(Net income before taxes + interest charges + long term lease payments) / (interest charges + long term lease payments)
GP margin
GP/Net Sales
Int bearing debt to equity
Int bearing debt / total equity
INV turnover
Cogs / inventory
Long term debt to equity
Long term debt / total equity
Net profit margin
NI after tax / net sales
Op profit margin
Op profit / net sales
Pretax income to sales
Pretax income / net sales
Pretax return on assets
Pretax income / total assets
Pretax return on common equity
Pretax income / common equity
Quick (acid test) ratio
Cash,AR,short term investments / current liabilities
Does not include inventory
Return on common equity
Net income / common equity
Return on investment
Net income + interest (1-tax rate) / (equity+long term debt)
Return on total assets
NI + interest (1-tax rate) / total assets
Sales to fixed assets (fixed asset turnover)
Sales + FA
Sales to Total Assets (TA turnover)
Sales / TA
Times interest earned
Earnings before interest and taxes / interest exp
Total Debt to Total Assets
Total debt / total assets
Total debt to Total equity
Total debt / total equity
Total equity to Total assets
Total equity / total assets
WC turnover
Sales / (current assets - current liabilities)
Valuation formulas and notation system after tax cost of debt
Kd=marginal borrowing rate (1-marginal tax rate)
Beta levered and unlevered
Bu= Bl / {1+[(1-t)(Wd/We)]}
Br= Bu {1+[(1-t)(Wd/We)]}
Build up method
ke= Rf + (RPm) + RPs + RPu
Cap Rate
= Disc rate - long term growth rate
CAPM
ke= Rf + B(RPm) + RPs + RPu
Modified CAPM
ke= Rf + B(RPm) + RPs + RPu
WACC
= We(ke) + Wd(kd)
B (beta)
A coefficient usually used to modify a rate of return variable
For public companies betas are levered
Bl = levered
Bu=unlevered
Br=relevered
Ke
Discount rate for common equity capital
Generally applicable to net cash flow avail to common equity
kd
After tax cost of debt
Rf
Risk free rate
RoR in the market free of default risk
RPm
Equity risk premium
Return from equity securities in excess of risk free rate
RPs
Risk premium for small stock over and above any RPm
RPs is avg size of the lowest quartile of NYSE as measured by market value of common equity
RPu
Risk premium for unsystematic risk attributable to the specific company (specific company risk)
t
Tax rate (expressed as a % of pretax income)
We
Wd
g
We=weight of common equity in capital structure
Wd=weight of debt in capital structure
g = long term rate of growth
