# Formulas for Finance

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```					                                     FINC 3511 - Corporate Finance - Formulas

Net income = (EBIT - INT)(1 - tax rate)                       Operating cash flow = NOPAT + Dep

NOPAT = EBIT(1 - tax rate)                                    Net cash flow = Net income + (Dep + Amort)

MVA = (shares outstanding)(stock price) - (total common equity)

EVA = EBIT(1 - tax rate) - (investor supplied capital)(percentage cost of capital)

Current assets = cash + marketable securities + inventory + accounts receivable

Current ratio = current assets                        Basic earning = EBIT
current liabilities                    power          Total assets

Inventory turnover =   sales                          Times interest =      EBIT
ratio                inventory                        earned           Interest charges

Quick ratio = current assets - inventory              Fixed asset =     Sales
current liabilities                    turnover      Net fixed assets

Days sales =    receivables                       EBITDA Coverage =   EBITDA + Lease Payments
outstanding (annual sales)/365                    Ratio             Interest + Principal + Lease
Charges pmts           pmts

Debt ratio =    total debt                            Total asset =      Sales
total assets                           Turnover         total assets

Net profit =   Net income                             Price earnings   = Price per share
margin         sales                                  ratio              Earnings per share

Market/Book = Market price per share
ratio         Book price per share

Return on total assets =       Net income      = (Net profit margin)(Total asset turnover)
Total assets

Return on common equity = Net income    = (net profit margin)(total asset turnover)(1/(1 – debt ratio))
common equity

projected account balance = (old account balance)[(new sales)/(old sales)]

Change in retained earnings = (net profit margin)(sales) – dividends

Additional funds needed = projected assets – (projected liabilities + projected equity)
n                                       n                              n

k i = ∑ k i pi
ˆ                                       k P = ∑ wi k i
ˆ          ˆ                  b P = ∑ wi b i                ki = kRF + bi (kM –kRF)
i =1                                    i=1                            i=1

             
             
             
n*m
   i                                                                                                                n
1
FVn = PV 1 +                                                                                      FVA n = PMT ∑ (1 + i )
n- t
PV = FVn          n*m 
 m                                                1 + i                                                     t =1
 m 
        

n 
1 
m
    i 
PVA n = PMT ∑   

t
EAR =  1 + 
t =1  (1 + i )                                                             m

                              
                              
INT N*m      1              1                                                                      D
VB =     ∑
m t=1   k b  t
+M            N* m                                                      VP =
  1+ k b                                                                   kP
  1+ m       m 
                      

Current yield = (annual interest payment)/(current price)

Yield-to-maturity = current yield + capital gain/loss

 DNS (1 + gC) 
t                  
(1 + g)                                                                          NS
D0 (1 + gS )  k S - gC 
ˆ D0
P0 =          = D1                                                                P0 = ∑
ˆ                    t
+
ks - g    ks - g                                                                  t =1  (1 + k s )         (1 + k s )NS

 N    1              1                                                                 D
( VB - FC) = INT  ∑                         
 (1 + B )t  + M  (1 + B )N 
( Vps - FC) =
 t =1 kd             kd                                                                kps

D1
(P0 - FC) =
ˆ                                                 WACC = w d k B (1 - t) + w p kps + w s k s
d
ks - g

Breakpoint total dollar amount of retained earnings available
=
(equity)        fraction of equity in the capital structure

n

n
CFt                                           n
CFt                       n
COFt           ∑ CIF (1+ k )
t
n- t

NPV = ∑
t =1   (1 + k )   t
− IO                     IO = ∑
t =1   (1 + IRR )   t              ∑ (1 + k )
t= 0
t
=   t= 0

(1+ MIRR )n

```
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