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gtpr flashcards > EQUATIONS > Flashcards

EQUATIONS Flashcards

1
Q

Net Worth

A

Assets - Liabilities

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2
Q

Current Ratio

A

Current Assets / Current Liabilities

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3
Q

Emergency Fund

A

Current Assets / Non-discretionary Expenses

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4
Q

Housing Ratio 2: Housing and all other debt ratio

A

Monthly Housing Costs (P+I+T+I) + all other recurring debt payments / Monthly gross income

<= 36%

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5
Q

ROI

A

(ending investments - beginning investment - savings - gifts received) / (average invested assets)

average invested assets = (beginning investments + ending investments) /2
savings = annual salary - fixed expenses - variable expenses

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6
Q

Savings Ratio

A

= Annual Savings (EE + ER contributions) \ Annual Gross Income

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7
Q

ARM (Adjustable Rate Mortgage)

A

= current adjustable mortgage rate + X)

X = 2/X

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8
Q

Housing Ratio 1

A

Monthly Housing Costs (P+I+T+I) / Monthly Gross Income

<= 28%

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9
Q

Margin Call

A

loan amount / (1 - maintenance margin)

loan = stock price * (1 - initial margin requirement)

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10
Q

Total Expected Return

A

= (expected return * probability of return) + (expected return * probability of return)….

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11
Q

coefficient of variation

A

CV = Standard deviation / Average Return

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12
Q

Covariance

A

COV = (std dev A) * (std dev B) * (correl coeff AB)

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13
Q

Correlation Coefficient

A

Correlation coeff AB = COV AB / (std dev A)*(std dev B)

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14
Q

Capital Market Line CML

A

Rp = Rf = std dev (p) * ((Rm - Rf)/ std dev (m))

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15
Q

Information Ratio

A

IR = (Rp - Rb)/ std dev (A)

Rp = portfolios actual return

Rb = return of the benchmark

Rp - Rb = excess return

Std dev A = tracking error of active return

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16
Q

Treynor Index

A

Tp = Rp - Rf / Bp

Rp = realized return on the portfolio

Rf = risk free rate of return

Bp = beta of portfolio

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17
Q

Jensen’s Alpha

A

ALPHA p = Rp - {Rf + (Rm - Rf)Bp]

Rp = realized portfolio return

Rf = risk-free rate of return

ALPHA p = alpha, the intercept that measures the managers contributions to the portfolio return

Bp = beta of the portfolio

Rm = expected return on the market

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18
Q

Holding Period Return

A

((selling price - purchase price) +/- CFs) / (beginning)

Dividends: +
Margin: -
taxes: -

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19
Q

Effective Annual Rate (EAR)

A

= (1 + i/n)^n - 1

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20
Q

Arithmetic Mean

A

= a1 + a2 + a3 + an / n

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21
Q

Geometric Mean

A

n SQRT a1a2…an

a1= set of given stock prices over period of time

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22
Q

Weighted Average Share Price

A

(# of shares* share P) + (# of shares * share P)… / (Share P + Share P +…)

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23
Q

Weighted Average Portfolio Return

A

= (FMV/TPV * % return) + (FMV/TPV * % return)…

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24
Q

Weighted Average Portfolio Beta

A

= (FMV/TPV * Beta) + (FMV/TPV * Beta)…

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25
Q

Dividend Discount Model

A

V = D1(*1+g) / (r - g)

r = required rate of return
g = dividend growth rate
D1 = Next period's dividend = D0(1+g)
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26
Q

Expected Rate of Return

A

r = (D1 (*1+g)/ p) + g

r = rate of return
p = market price
v = value
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27
Q

P/E Ratio

A
  • represents how much an investor is willing to pay for reach dollar of earnings
  • measure of the stocks price to it’s earnings
    useful to value a stock if the firm pays no dividends
    AKA P/E multiplier

= Price per Share / EPS

Div 0 = EPS * (1 - retention)

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28
Q

P/E Ratio

A

Price per Share / EPS

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29
Q

Price / Earnings to Growth (PEG) Ratio

A

= Stocks PE Ratio / 3-5 year growth rate earnings

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30
Q

Dividend Payout Ratio

A

= Common Stock Dividend / Earnings Per Share

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31
Q

Return on Equity (ROE)

A

= EPS / stockholders equity per share

stockholders equity per share = total equity / shares outstanding

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32
Q

Dividend Yield Formula

A

= dividend / stock price

33
Q

Average Price Per Share

A

total cost / # of shares

34
Q

Tax Equivalent Yield

A

= r / (1-t)

= corporate rate * (1 - marginal tax rate)

r= tax exempt yield

t = marginal tax rate

= (corporate rate) * (1-marginal tax rate)

35
Q

TEY Both Fed and State Taxes

A

= tax exempt yield / (1 - [fed tax rate + state tax rate (1- fed tax rate)]

this is used if the client itemizes the deductions

36
Q

Coupon Rate or Nominal yield

A

= Coupon payment / Par

37
Q

Current Yield

A

= Coupon Payment / price of bond

38
Q

YTM

A
39
Q

Conversion Value

A

CV = (Par / CP) * Ps

Ps = price of the common stock

CP = conversion price

(1,000 / CP) = conversion ratio or # of shares the convertible can be converted into

40
Q

Property Valuation Formula

A

capitalized value = Net Operating Income / Capitalization Rate

41
Q

Capitalized Rate

A

= NOI / cost

42
Q

Net Operating Income

A 
= 
Gross rental receipts
\+ Non-rental income
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
= potential gross income
- vacancy and collection losses
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
effective gross income
- total expenses
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
= net income 
\+ interest expense
\+ depreciation expense
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
= Net Operating Income
  • cash operating expenses does not include deprec or amortiz, which are not cash expenses
    excludes payments on debt service this is a financing expense, not an operating one
43
Q

NAV

A

= (Assets - liabs) / shares outstanding

44
Q

donee’s basis

A

= Donors basis + (( net apprec in value of gift / value of taxable gift) * gift tax paid)

45
Q

Gain on Asset

A

= sale price - net appreciation

46
Q

Basis for Sales Purposes

A

= (Amount Realized / FMV) * Basis of property

47
Q

Realized Gain/Loss

A

= Amount Realized - adjusted basis

48
Q

Adjusted Basis

A

= Cost of Property + capital additions - cost recovery

49
Q

Amount Realized on the sale/exchange of an asset

A

= sum of cash received + FMV of property received in exchange + liabilities shed

50
Q

Recognized Value

A

= depreciation - Straight line depreciation

51
Q

1250 Loss Calculation

A

= sale price
- Adjusted basis (Purchase price - depreciation)
_________________
= Total Gain
- Ordinary Income (excess depreciation)
_________________
Remaining Gain
===============
Taxed at 25% (Total depreciation - excess depreciation)
Section 1231 Gain (sale price > purchase price)

52
Q

New Asset Basis using IRC approach

A
  • Beware!!
Adjusted Basis of like-kind asset given
\+ Adjusted basis of boot given
\+ Gain recognized
- FMV of boot received
- loss recognized
= Basis in new asset
53
Q

Basis in like-kind asset received

A

FMV of new asset
- gain not recognized
+ Loss not recognized

54
Q

Basic Income Tax Formula

A 
INCOME
- exclusions from income
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Gross Income
- deductions for AGI
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
AGI
- the greater of standardized or itemized deductions
- any QBI * 20% deduction
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Taxable Income

Tax on Taxable income
- tax credits (including fed income tax w/h and other prepayments of fed income taxes)
_________________
Tax due (or refund)

55
Q

Exclusion ratio

A

= adjusted basis / fmv = exclusion %

(exclusion % * distribution received) = not subject to income tax

distribution received - (exclusion % * distribution received) = subject to income tax

56
Q

Ratio of AB

A

= AB before withdrawal / FMV of account at withdrawal

57
Q

Business Asset Depreciation Recapture

A

= Original Purchase Price
- Accelerated Depreciation Amount
- Straight Line depreciation
= After Tax Basis

Selling Price
- After Tax basis
= Gain/Loss

Gain/Loss
- Accelerated Depreciation (Ordinary Income)
- Straight Line Depreciation (25% Unrec 1250)
= leftover is 1231 LTCG

58
Q

Adjusted Basis

A

= Original cost (or other adjusted basis
+ capital additions
- capital recoveries

59
Q

Appreciated Property with Gift Tax Paid

A

= Donor’s basis + (Net Appreciation in Gift / Taxable gift) * Gift tax paid

60
Q

Equivalent TF Rate for taxable bond

A

= interest rate * (1 - marginal tax rate)

61
Q

MFJ IRA contribution phaseout amount

A

Reduction = Contribution Limit × AGI-Lower Limit ÷ $20,000

$109,000 - $129,000

62
Q

Straight Line Depreciation Equation

A 
adjusted basis
- salvage value
\_\_\_\_\_\_\_\_\_\_\_\_
= depreciable amount / estimated useful life
\_\_\_\_\_\_\_\_\_\_\_\_
= annual depreciation deduction
63
Q

Cost depletion method

A

deduction amount = (asset basis / estimated total # of recoverable units of the assets) * # of units sold (not produced

64
Q

Percentage Depletion Method

A

= % is applied to the GI from the property (limited to 50% of the GI)

65
Q

Self-Employment Tax

A

= Net Self-Employment Income
* .9235
______
- net earnings subject to self-employment tax
* .0153 self employment tax rate ( up to wage base of $147,000)
______
= self-employment tax

66
Q

Self-Employed Individual’s contribution

A 
net self-employment income
* (1/2) self-employment taxes
\_\_\_\_\_\_\_\_
= Adjusted Net Self-Employment Income
* (.20)
\_\_\_\_\_\_\_
= self-employed individuals qualified plan contribution
67
Q

Tax Formula for a C Corp

A 
= Total Income
- exclusions from GI
\_\_\_\_\_\_\_\_\_\_\_
= GI
- deductions
\_\_\_\_\_\_\_\_\_\_\_
= taxable income
68
Q

Personal Income Tax Return for S corps reportable income

A

= reported taxable income * (# days held / 365) * (# of shares / S corp total # of shares)

69
Q

Tax Ramifications of Withdrawals/Distributions from an S corp

A
  • distributions from an S corp to a shareholder follow the rules applying to distributions from partnerships
  • distributions from an S Corp are considered nontaxable to the extent of the shareholders basis in the stock
  • any distribution in excess of the stock adjusted taxable basis is treated as cap gain
70
Q

Advantages of S Corps

A
  • income is passed through to the shareholders for fed income tax purposes
  • income is taxed at the individual level which may be a lower tax rate than the applicable corp rate
  • shareholders have limited liability
  • Distributions from S corps are exempt from the payroll tax system, assuming the corps provide adequate comp to those shareholders who are EEs of the corp
71
Q

Disadvantages of S corps

A
  • limited to 100 shareholders
  • only 1 class of stock is allowed
  • cannot have corp, partnership, certain trust, or nonresident alien shareholders
  • shareholder EEs owning more than 2% of the company must pay taxes on a range of EE fringe benes that would be TF to a shareholder/EE of a C corp
  • tax rate of the individual shareholder may be higher than the corp tax rate
  • borrowing may be difficult w/o stockholder personal guarantees, which negates part of the advantage of limited liability
72
Q

Flow through entities

A
  • if you have significant personal income and you expect biz to have losses
73
Q

LLC taxed as a partnership

A
  • if you want to be able to allocate income/losses in %s different than ownership
74
Q

sole proprietorships and general partnerships

A
  • avoid these if you are concerned about liability
75
Q

C corp

A
  • consider this if significant income is expected from the biz
76
Q

Personal Holding company

A

a corp is this if both of the following requirements are met:

  • Personal Holding Company Income Test - At least 60% of the corps adjusted ordinary GI for the tax year is from dividends, interest, rent and royalties
  • stock ownership requirement - at any time during the last half of the tax year, more than 50% in value of the cops outstanding stock is owned, directly or indirectly, by 5 or fewer individuals
77
Q

S corp

A
  • provides flow-through accounting so she can offset OI with business losses
78
Q

C Corps

A
  • entitled to a dividends-received deduction of 100% if they own 80% or more of the company paying the dividend
79
Q

Deductions for Business Income from Pass-through entities and sole proprietorships

A
  • an individual may deduct 20% of QBI from partnership, S Corp, or sole prop, as well as 20% of aggregate qualified REIT dividends, qualified cooperative dividends, and qualified publicly traded partnership income. the 20% deduction is not allowed in computing AGI but rather is allowed as a deduction reducing taxable income
  • a limit based on W2 wages paid is phased in for MFJ taxpayers with taxable income of $340,100 or more ($170,050 for other individuals). A disallowance of the deduction with respect to specified service trades or biz also is phased in above these threshold amounts of taxable income. A specified service trade or biz means any trade or biz involving the performance of services in the fields of health, law, consulting, athletics, financial services, brokerage services, or any trade or biz where the principal asset of such trade or biz is the reputation or skill of 1+ of its EEs or owners, or which involves the performance of services that consist of investing and investment management trading, or dealing in securities, partnership interests

gtpr flashcards (11 decks)

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