Level 1 CFA Formulas

Created by tjsepp 

Upgrade to
remove ads

Receivables Turnover & Ratio Type

sales/Avg. Receivables **(Activity Ratio)

Days Sales Outstanding & Ratio Type

365/Receivables Turnover **(Activity Ratio)

Inventory Turnover & Ratio Type

COGS/Avg. Inventory **(Activity Ratio)

Days Inventory on Hand & Ratio Type

365/Inventory Turnover **(Activity Ratio)

Payables Turnover & Ratio Type

Purchases/Avg. Trade payables **(Activity Ratio)

Number of Days Of Payables & Ratio Type

365/Payables Turnover ratio **(Activity Ratio)

Total Asset turnover & Ratio Type

Revenue/Avg. Total Assets **(Activity Ratio)

Fixed Asset Turnover & Ratio Type

Revenue/Avg Net Fixed Assets **(Activity Ratio)

Working Capital Turnover & Ratio Type

Revenue/Avg. Working Capital **(Activity Ratio)

Current Ratio & Ratio Type

Current Assets/Current Liabilities **(Liquidity)

Quick Ratio & Ratio Type

(Cash + Marketable Securities+Receivables)/Current Liabilities **(Liquidity)

Cash Ratio & Ratio Type

(Cash + Marketable Securities)/Current Liabilities **(Liquidity)

Defensive Interval & Ratio Type

(Cash + Marketable Securities + Receivables)/Average daily Expenditures **(Liquidity)

Cash Conversion Cycle & Ratio Type

(Days sales Outstanding) + (Days of Inventory on hand) - (Number of days of Payables) **(Liquidity)

Debt to equity & Ratio Type

Total Debt/Total Shareholders Equity **(Solvency)

Debt to capital & Ratio Type

total debt/(Total Debt + Shareholders equity) **(Solvency)

Debt to assets & Ratio Type

Total debt/Total assets **(Solvency)

Financial Leverage & Ratio Type

Average total assets/average total equity **(Solvency)

Interest Coverage & Ratio Type

(EBIT + Lease payments)/(Interest Payments + Lease payments) **(Solvency)

Fixed Charge Coverage & Ratio Type

(EBIT + lease Payments)/(Interest Payments + lease Payments) **(Solvency)

Net Profit Margin & Ratio Type

Net Income/Revenue **(Profitability)

Gross Profit Margin & Ratio Type

Gross Profit/revenue **(Profitability)

Operating Profit Margin & Ratio Type

EBIT (or Op.Income)/revenue **(Profitability)

Pretax Margin & Ratio Type

EBT/Revenue **(Profitability)

ROA & Ratio Type

Net Income/Avg. total assets **(Profitability)

Extended ROA & Ratio Type

(Net Income + Interest Expense (1-tax rate))/Average Total Assets **(Profitability)

Operating Return on assets & Ratio Type

EBIT/Avg. Total Assets **(Profitability)

Return on Total capital & Ratio Type

EBIT/Avg Total Capital **(Profitability)

Return on equity & Ratio Type

Net Income/Average Total Equity **(Profitability)

Return On Common Equity & Ratio Type

(Net Income - Preferred Dividends)Average Common Equity **(Profitability)


Net Income + Non Cash Charges + [Interest Expense * (1 - Tax rate)] - Fixed capital Investment - Working Capital Investment

FCFF (short Version)

Cash Flow from Operations + [Interest Expense * (1-Tax rate)]- fixed Capital Investment

FCFE (Free cash flow to equity)

Cash Flow From Ops - Fixed Capital Investment + Net Borrowing

Common Size Income Statement Ratios

Statement Item/sales

Common Size Balance Sheet Ratios

Statement Item/Total Assets

Common Size Cash Flow ratios

Cash FLow sttement account/Revenues

Original DuPont Equation (ROE)

(Net Profit Margin)*(Asset Turnover)(Leverage Ratio)

Extended Dupont Equation

[Tax Burden][Interest Burden][EBIT Margin][Asset Turnover][Financial Leverage]

Tax Burden

Net Income/EBT

Interest Burden


EBIT Margin


Basic EPS

(Net Income - Preferred Dividends)/Weighted Avg # shares outstanding

Diluted EPS

([Net income-Preferred Dividends]+[Convertable Preferred Dividends]+[Convertable debt Interest (1-Tax rate)])/
([Weighted Avg Shares]+[Shares from converted Preferred Shares]+[Shares from conversion of debt]+[Shares from stock options])

DDB Depreciation

(2/Useful Life)*(cost - Accumulated Depreciation)


(Cost - Residual Value)/Useful life

Net Increase in Common from Stock option Exercise (Quick Method)

[(Avg Market Price - Exercise Price)/Avg Mkt Price] * Shares that can be converted

Quick check of Preferred Dilution

(Par Rate)/Share Conversion *(if < basic EPS it is dilutive)

Payback Period

(Pv of future cash flow/CF₀) or 1+(NPV/CF₀)



After tax cost of debt

Kd (1-t)

Cost of preferred stock


Three formulas for the cost of common equity

Risk free+Beta(market return-Risk free)
Bond yield + risk premium

Unlevered asset beta

Beta(of equity)*(1/(1+(1-t)(d/e)))

Project beta

Beta(of asset)*[1+[1-t)(D/E))]

Cost of common equity with a country risk premium

Risk Free +beta(market return-risk free + country risk premium)

Break Point (in cap structure)

amount of capital at which the components cost of capital changes/weight of the component in the capital structure

Degree of operating leverage


Break even quantity of sales

(Fixed operating costs + fixed financing costs)/(price-variable cost per unit)

% discount (think bonds)

(face value-Price)/Face value

Discount basis yield


Money Market Yield

((face - price)/price)(360/days)

Bond Equivalent Yield

Holding period yield*(360/days)

Margin call price

P₀(1-initial margin/1-Maintenance margin)

Price weighted Index

Sum of stock Prices/Number of stocks in index (adjusted for splits)

Market Cap weighted index

sum[(price)(shares)]/sum[(price in base year)(shares)] * base year index value

Preferred Stock valuation model



% Change in bond Price/Yield change in %

% Price change (duration)

-Duration * (yield change in %)

Explain duration

The percentage in price for a 1% change in yield

Credit Spread

yield on a default free bond - Yield on a risky bond

Please allow access to your computer’s microphone to use Voice Recording.

Having trouble? Click here for help.

We can’t access your microphone!

Click the icon above to update your browser permissions above and try again


Reload the page to try again!


Press Cmd-0 to reset your zoom

Press Ctrl-0 to reset your zoom

It looks like your browser might be zoomed in or out. Your browser needs to be zoomed to a normal size to record audio.

Please upgrade Flash or install Chrome
to use Voice Recording.

For more help, see our troubleshooting page.

Your microphone is muted

For help fixing this issue, see this FAQ.

Star this term

You can study starred terms together

NEW! Voice Recording

Create Set