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    Key Equations - Edited

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    Chantal

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    Key Equations - Edited

    Uploaded by

    Chantal
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    Key Equations - edited

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    5 views4 pages

    Key Equations - Edited

    Uploaded by

    Chantal

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    Equation List Finance 210 – 13th Edition

    CHAPTER 3

    I. Short-term solvency or Liquidity Ratios IV. Profitability Ratios


    Current Assets Net Income
    Current ratio = Current Liabilities Profit margin = Sales

    Current Assets−Inventory Net Income


    Quick ratio = Return on assets = Total assets
    Current Liabilities

    Cash Net Income


    Cash ratio = Current Liabilities Return on equity = Total equity

    Net Working Capital Net Income Sales Assets


    Net working capital to total assets = ROE = x Assets x Total equity
    Total Assets (Sales)

    Current Assets
    Interval measure = Average Daily Operating Costs
    V. Market Value Ratios
    II. Long-term Solvency or financial Price per share
    Leverage Ratios PE ratio = Earnings per share
    Total Assets−Total Equity
    Total debt ratio = Total Assets Market value per share
    Market-to-book-ratio = Book value per share
    Total Debt
    Debt-equity ratio = Total Equity
    Price per share
    Price-sales Ratio = Sales per share
    Total Assets
    Equity multiplier = Total Equity
    Market value of assets
    Tobin’s Q Ratio = Replacement cost of assets
    Long−term Debt
    Long-term debt ratio = Long−term Debt+Total Equity
    Price−earning raio
    PEG Ratio = Earnings growth rate(%)
    EBIT
    Times interest earned ratio = Interest

    EBIT+Depretiaton
    Cash coverage ratio = Interest
    III. Asset Management or Turnover Ratios
    Cost of goods sold
    Inventory turnover = Inventory

    365 days
    Days’ sales in inventory = Inventory turnover

    Sales
    Receivables turnover = Accounts Receivable

    365 days
    Days’ sales in receivables = Receivable turnover

    Sales
    NWC turnover = NWC
    Sales
    Fixed asset turnover = Net Fixed Assets

    Sales
    Total asset turnover = Total Assets
    CHAPTER 5
    Future Value of a PV:𝑭𝑽𝒕 = 𝑷𝑽𝟎 (𝟏 + 𝒓)𝒕
    CHAPTER 6
    𝟏
    𝟏−[(𝟏+𝒓)𝒕 ]
    Present value of an annuity: 𝑷𝑽𝟎 = 𝑪 𝒙 { }
    𝒓

    [(𝟏+𝐫)𝐭 −𝟏]
    The future value factor for an annuity: 𝑭𝑽𝒕 =
    𝐫
    𝑪
    Present value of perpetuity: 𝑷𝑽𝟎 =
    𝒓
    𝟏+𝒈 𝒕
    𝟏−( )
    𝟏+𝒓
    Present value of a growing annuity: 𝑷𝑽𝟎 = 𝑪 𝒙 [ ]
    𝒓−𝒈

    𝑪
    Present value of a growing perpetuity: 𝑷𝑽𝟎 =
    𝒓−𝒈

    𝑸𝒖𝒐𝒕𝒆𝒅 𝒓𝒂𝒕𝒆 𝒎
    Effective Annual rate (EAR), EAR = [𝟏 + ] −𝟏
    𝒎

    Effective Annual rate (EAR), with Continuous Compounding: EAR =


    𝒆𝒒 − 𝟏
    CHAPTER 7
    1
    1−( ) 𝐹
    (1+𝑅)𝑡
    Bond value = 𝐶 [ ] + (1+𝑟)𝑡
    𝑟

    CHAPTER 8
    D1 + P1
    P0 =
    1+R

    D
    P0 =
    R
    D0 x (1 + g) D1
    P0 = =
    R−g R−g
    Dt x (1 + g) Dt+1
    Pt = =
    R−g R−g
    D1 1 + g1 t Pt
    P0 = x [1 − ( ) ]+
    R − g1 1+R (1 + R)t
    Dt+1 D0 x (1 + g1 )t x (1 + g 2 )
    Pt = =
    R − g2 R − g2
    D1
    R= +g
    P0
    Price at time t Pt = Benchmark PE ratio x EPSt
    CHAPTER 10
    OCF = Net income + Depreciation
    OCF = Sales – Costs – Taxes
    OCF = (Sales – Costs) x (1- TC ) + Depreciation x TC
    CHAPTER 13
    E(R) = ∑𝒋 𝑹𝒋 𝒙 𝑷𝒋
    𝛔𝟐 = ∑[ 𝑹𝒋 − 𝑬(𝑹)]𝟐 𝒙 𝑷𝒋
    𝒋

    𝛔 = √𝛔 𝟐

    Risk premium = Expected return – risk-free rate


    𝒏

    𝑬(𝑹𝒑 ) = ∑ 𝒙𝒊 𝐱 𝑬(𝑹𝒊 )
    𝒊=𝟏

    Total return = Expected return + Unexpected return


    R =E(R) + U
    Announcement = Expected part + Surprise
    R =E(R) + Systematic portion + Unsystematic portion
    Total risk = Systematic risk + Unsystematic risk
    𝑛

    𝛽𝑃 = ∑ 𝑥𝑖 x 𝛽𝑖
    𝑖=1

    𝐸(𝑅𝑖 ) = 𝑅𝑓 + [ 𝐸(𝑅𝑀 ) − 𝑅𝑓 ] 𝑥 𝛽𝑖
    CHAPTER 14
    𝐷1
    𝑅𝐸 = +𝑔
    𝑃0

    𝑅𝐸 = 𝑅𝑓 + β𝐸 𝑥 (𝑅𝑀 − 𝑅𝑓 )
    𝐷
    𝑅𝑃 =
    𝑃0

    V=E+D

    E D
    100% = +
    V V

    E D
    WACC = ( ) x R E + ( ) x R D x (1 − TC )
    V V
    E P D
    WACC = ( ) x R E + ( ) x R p + ( ) x R D x (1 − TC )
    V V V

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