Appendix: Basic Finance Formulae
| Ratios |
|
| Current Ratio |
= CA / CL |
| Quick Ratio |
= (CA – Invt’y) / CL |
|
Days Sales Outstanding |
= (AR / Credit Sales) × 360 |
|
Inventory Turnover |
= COGS / Invt’y |
|
Debt to Net Worth |
= Total Debt / Total Equity |
|
Debt to Total Assets |
= Total Debt / Total Assets |
|
Times Interest Earned |
= EBIT / Interest Expense |
|
Gross Profit Margin |
= Gross Profits / Total Sales |
|
Operating Profit Margin |
= Operating Profits / Total Sales |
|
Pre-Tax Profit Margin |
= Pre-Tax Profits / Total Sales |
|
Net Profit Margin |
= Net Profits / Total Sales |
|
Return on Assets |
= EBIT / Total Assets |
|
Return on Equity |
= Net Income / Total Equity |
|
Sales to Fixed Asset Turnover |
= Total Sales / FA |
|
Sales to Total Asset Turnover |
= Total Sales / Total Assets |
|
Price/Earnings Ratio |
= Common Share Market Price / Earnings Per Share |
|
Dividend Yield |
= Total Dividends / Common Share Market Price |
|
|
= Dividends Per Share / Earnings Per Share |
|
Payout Ratio (PR) |
= Total Dividends / Net Income |
|
|
= Dividends Per Share / Earnings Per Share |
|
Retention Rate (RR)
|
= (Net Income – Total Dividends) / Net Income = 1 – PR |
|
PR + RR
|
= 100% |
| COGS | = Beginning Inventory + Purchases – Ending Inventory |
| Depreciation Expense | |
| Straight-Line | = (Cost – Salvage Value) / Number of Years |
| Sum-of-the-Years’ Digits | = (Cost – Salvage Value) x (Reverse Years / SOYD) |
| Double / Declining Balance | = (Declining Balance) x (Straight-line Rate) |
| Tax Shield | = (D) (T) |
|
Free Cash Flow |
= EBITDA (1 – T) + Depreciation (T) – Necessary Capital Expenditures – (Increase in Net Working Capital) |
|
External Funds Needed |
= [(A0/S0) ΔS] – [(AP0/S0) ΔS] – [(M0) (S1) (RR0)] |
| P0 |
= (D0) (1 + G) / (R – G) |
|
D1 |
= (D0) (1 + G) |
|
R |
= (D1) ÷ (R- G) |
|
R |
= (FV / PV) 1/n -1 |
|
RM |
= RF + (RM – RF) βM |
|
RP |
= RF + (RP – RF) βP |
|
Market Risk Premium (MRP) |
= RM – RF |
|
Portfolio Risk Premium (PRP) |
= RP – RF |
|
Weighted Average Portf. Ret. |
= RP = ∑ (wi) × (Ri) |
|
Variance |
= σ2 = Σ(xi – x)2 ˜ (n – 1) |
|
Operating Break-even Profit |
= PQ = VQ + F |
