Financial evaluation report

1
8006FMGT Financial Management
Formula Sheet
Module 2
1. Current ratio =
Current assets
Current liabilities
2. Quick ratio (or acid-test ratio) = Current assests − Inventory
Current liabilities
3. Average collection period =
Accounts receivable
Annual credit sales/365 days =
Accounts receivable
Daily credit sales
4. Accounts receivable turnover = Annual credit sales
Accounts receivable
5. Inventory turnover = Cost of goods sold
Inventory
6. Debt ratio = Total liabilities
Total assets
7. Interest coverage ratio = Operating profit or EBIT
Interest expense
8. Total asset turnover =
Sales
Total assets
9. Fixed asset turnover = Sales
Net property,plant and equipment
10. Gross profit margin =
Gross profit
Sales
11. Operating profit margin (OPM) =
Operating profit or EBIT
Sales
12. Net profit margin =
Net profit
Sales
13. Return on assets (ROA) =
Operating profit or EBIT
Total assets
14. Return on assets (ROA) = Operating profit margin(OPM)×Total asset turnover (TATO)
15. Return on assets (ROA) =
Operating profit or EBIT
Sales
×
Sales
Total assets
=
Operating profit or EBIT
Total assets
16. Return on equity (ROE) =
Net profit
Ordinary equity
17. Return on equity (ROE) =
Net profit
Equity
=
Net profit
Sales
×
Sales
Total assets
×
Total assets
Ordinary equity
18. Price– earnings (PE) ratio =
Market price per share
Earnings per share
19. Market– to– book ratio =
Market price per share
Book value per share
=
Market price per share
Ordinary shareholders
′equity
Ordinary shares outstanding ⁄2
Module 3
20. = ( ⏟×
Total revenue
) − [ (⏟ × )
Total variable
cost
+ ⏟
Total fixed
cost ]
21. Accounting break-even =

⏟−
Contribution margin
per unit
22. Cash break-even =
Fixed operating cost other than depreciation
⏟−
Contribution margin
per unit
23. Operating cycle = Inventory conversion period + Average collection period
24. Accounts payable deferral period =
365
Cost of goods sold÷Accounts payable
25. Cash conversion cycle = Operating cycle − Accounts payable deferral period
26. Inventory conversion period =
365
Inventory turnover ratio
27. Inventory turnover ratio =
Cost of goods sold
Inventory
28. Average collection period =
Accounts receivable
Daily credit sales =
Accounts receivable
Annual credit sales⁄365
29. Interest = Principal×Rate×Time
30. Annual percentage rate (APR) =
Interest
Principal×Time
=
Interest
Principal
×
1
Time
31. Cost of forgoing
a cash discount =
Cash discount %
1−Cash discount %
×
365
(
N. of days until full
payment must be made)−(
N. of days until cash
discount is lost )
Module 4
32. = (1 + )
⏟
Future value
interest factor
33. = (1 +

)
×
34. Interest earned = Beginning value×Interest rate
35. = [
1
(1+)
] ⏟
Present value
interest factor
(PVIF)
=

(1+)
36. = [
1
(1+

)
×]
37.
Annual percentage
rate (APR) = Interest rate per period×Compounding periods
38. Effective annual rate (EAR) = (1 +
Quoted annual rate

)

− 13
39. Periodic rate =
Quoted annual rate

40. Future value of an annuity: = [
(1+)
−1

] ⏟
Annuity future value
interest factor
41. Future value of an annuity (due): = [
(1+)
−1

] (1 + )
42. Present value of an annuity (due): = [
1−
1
(1+)

] (1 + )
43. Present value of a perpetuity: =

44. Present value of a growing perpetuity: =
period 1
−
45. Bond value = Interest[
1−
1
(1+)
] + Principal[
1
(1+)
]
46. Bond value
(semi-annual payments) = (
Interest
2
) [
1−
1
(1+

2
)
2

2
] + Principal[
1
(1+

2
)
2]
47. Constant dividend growth rate model: =
0
⏞ ( 1+ )
1
−
=
1
−
48. Capital Asset Pricing Model (CAPM): = + [( − )]
49. Retention rate () = 1 −
1
1
50. Dividend payout ratio =
1
1
51. Rate of growth in dividends () = ×ROE
52. Rate of growth in dividends () = (1 −
1
1
) ×ROE
53. Value of
preference share =
Annual preference share dividend
Market’s required return on preference share =

Module 5
54. Cash
return
=
Ending
price +
Cash distribution
(dividend) −
Beginning
price
55. Rate of
return
=
Cash return
Beginning price
=
Ending
price +
Cash distribution
(dividend) −
Beginning
price
Beginning price
56. () = 1×(1
) + 2×(2
) + ⋯ + ×(
)
57.
2 = [1 − ()]
2×(1
) + [2 − ()]
2×(2
) + ⋯ + [ − ()]
2×(
)
58. = √
2 = √[1 − ()]
2×(1
) + [2 − ()]
2×(2
) + ⋯ + [ − ()]
2×(
)
59. (portfolio) = [1×(1
)] + [2×(2
)] + ⋯ + [×(
)]
60. portfolio = √1
21
2 + 2
22
2 + 2121,2124
61. Total risk = Systematic Risk + Unsystematic risk
62. portfolio = 11 + 22 + ⋯ +
63. (portfolio) = + [() − ]
64. (
) = +
[() − ]
Module 6
65. = 0 +
1
(1+)1 +
2
(1+)2 + ⋯ +

(1+)
66. PI =
1
(1+)1+
2
(1+)2+⋯+

(1+)
0
67. 0 +
1
(1+)1 +
2
(1+)2 + ⋯ +

(1+) = 0
Module 7
68. = ×(1 − )× + × + ×
69. Debt ratio =
Total liabilities
Total assets
70. Enterprise
value = (
Book value of
interest-bearing debtExcess
cash )
⏞
Net debt
+
Market value
of equity
71. Enterprise value = Net debt + Market value of equity
72. Debt to enterprise
value ratio =
Book value of
interest-bearing debt−
Excess
cash
(
Book value of
interest-bearing debt−
Excess
cash )+
Market value
of equity
=
Net debt
Enterprise value
73. Interest coverage ratio =
Operating profit or EBIT
Interest expense
74. Firm value =
Firm cash flow

75. = (×

) + (×

)
76. = Unlevered + (Unlevered − ) (

)
77. = WACC + (WACC − ) (

)
78. Cash flow to a firm
with financial leverage =
Cash flow to the firm
without leverage +
Interest
tax shield
79. = Unlevered equity + [(Unlevered equity − ) (

) ×(1 − )]
80. = [
(1 − )×

] + [×