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ABV Notes > Valuation Formulas > Flashcards

Valuation Formulas Flashcards

1
Q

AR turnover

A

Sales / AR

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2
Q

Avg annual growth rate (AAGR)

A

{Sum all periods sales [( CY sales / PY sales) - 1 ] / # of periods analyzed} x 100

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3
Q

Avg collection period

A

365/AR turnover

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4
Q

CAGR

A

{[CY sales / base year sales)(1/# of periods analyzed)]-1}x100

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5
Q

current ratio

A

Current assets / current liabilities

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6
Q

Debt free working capital turnover

A

Sales / debt free working capital

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7
Q

Div pay out ratio

A

Div paid / net income

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8
Q

DuPont Formula

A

NI / Equity = (NI / Sales)x(sales/assets)x(assets/equity)

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9
Q

EVA Formula

A

EVA=NOPAT - $ WACC
EVA = EBIT x (1-t) - WACC x capital invested
EVA = (equity) x (ROE-Ke)

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10
Q

Fixed Charge Coverage

A

(Net income before taxes + interest charges + long term lease payments) / (interest charges + long term lease payments)

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11
Q

GP margin

A

GP/Net Sales

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12
Q

Int bearing debt to equity

A

Int bearing debt / total equity

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13
Q

INV turnover

A

Cogs / inventory

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14
Q

Long term debt to equity

A

Long term debt / total equity

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15
Q

Net profit margin

A

NI after tax / net sales

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16
Q

Op profit margin

A

Op profit / net sales

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17
Q

Pretax income to sales

A

Pretax income / net sales

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18
Q

Pretax return on assets

A

Pretax income / total assets

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19
Q

Pretax return on common equity

A

Pretax income / common equity

20
Q

Quick (acid test) ratio

A

Cash,AR,short term investments / current liabilities

Does not include inventory

21
Q

Return on common equity

A

Net income / common equity

22
Q

Return on investment

A

Net income + interest (1-tax rate) / (equity+long term debt)

23
Q

Return on total assets

A

NI + interest (1-tax rate) / total assets

24
Q

Sales to fixed assets (fixed asset turnover)

A

Sales + FA

25
Q

Sales to Total Assets (TA turnover)

A

Sales / TA

26
Q

Times interest earned

A

Earnings before interest and taxes / interest exp

27
Q

Total Debt to Total Assets

A

Total debt / total assets

28
Q

Total debt to Total equity

A

Total debt / total equity

29
Q

Total equity to Total assets

A

Total equity / total assets

30
Q

WC turnover

A

Sales / (current assets - current liabilities)

31
Q

Valuation formulas and notation system after tax cost of debt

A

Kd=marginal borrowing rate (1-marginal tax rate)

32
Q

Beta levered and unlevered

A

Bu= Bl / {1+[(1-t)(Wd/We)]}

Br= Bu {1+[(1-t)(Wd/We)]}

33
Q

Build up method

A

ke= Rf + (RPm) + RPs + RPu

34
Q

Cap Rate

A

= Disc rate - long term growth rate

35
Q

CAPM

A

ke= Rf + B(RPm) + RPs + RPu

36
Q

Modified CAPM

A

ke= Rf + B(RPm) + RPs + RPu

37
Q

WACC

A

= We(ke) + Wd(kd)

38
Q

B (beta)

A

A coefficient usually used to modify a rate of return variable

For public companies betas are levered

Bl = levered
Bu=unlevered
Br=relevered

39
Q

Ke

A

Discount rate for common equity capital

Generally applicable to net cash flow avail to common equity

40
Q

kd

A

After tax cost of debt

41
Q

Rf

A

Risk free rate

RoR in the market free of default risk

42
Q

RPm

A

Equity risk premium

Return from equity securities in excess of risk free rate

43
Q

RPs

A

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

44
Q

RPu

A

Risk premium for unsystematic risk attributable to the specific company (specific company risk)

45
Q

t

A

Tax rate (expressed as a % of pretax income)

46
Q

We
Wd
g

A

We=weight of common equity in capital structure

Wd=weight of debt in capital structure

g = long term rate of growth

ABV Notes (2 decks)

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