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70 terms

Level 1 CFA Formulas

STUDY
PLAY
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)
FCFF
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
EBT/EBIT
EBIT Margin
EBIT/Revenue
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)
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)
WACC
(Wd)[Kd(1-t)]+(Wps)(Kps)+(Wce)(Kce)
After tax cost of debt
Kd (1-t)
Cost of preferred stock
Div/Price
Three formulas for the cost of common equity
(Div/Price)+g
or
Risk free+Beta(market return-Risk free)
or
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
%ΔEBIT/%Δsales
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
(discount)(360/days)
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
Dp/Kp
Duration
% 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