Flashcards in BEC Formulae Deck (95):

1

## Marginal propensity to consume

### Change in Spending/Change in income

2

## Marginal propensity to save

###
Change in savings/change in income

or

1-marginal propensity to consume

3

## Price elasticity of demand

### % change in quantity demanded/% change in price

4

## CPI calculation

### CPI current-CPI last/ CPI Last*100

5

## Returns to scale

### Percentage Increase in output/Percentage increase in input

6

## Accounting profit

### Revenue -accounting cost

7

## Economic cost

### Explicit+Implicit cost

8

## Working capital

### Current assets-Current Liablities

9

## Current ratio

### CA/CL

10

## Quick Ratio

### Quick Tests/CL

11

## Cash conversion cycle formulae

###
CCC=ICP+RDP-PDP

Where Inventory conversion period= 365/(cogs/Inventory)

RDP= 365/(Sales/Receivable)

PDP= 365/(COGS/Payable)

Operating Cycle: 365/Purchases X Average Inventories+ 365/Cr.Sales X Avg. Accounts Receivable

12

## A/R turnover

### Net credit sales/ Average AR

13

## Inventory turnover ratio

### COGS/Average Inventory

14

## Number of days supply in average inventory

### 360/Inventory Turnover

15

## Pay Back period

### Net Initial Investment/After tax annual net cash inflow

16

## IRR

###
Investment/Annual cash flows= When we divide initial investment/annual cash flows. we will get one percentage . Match it with the table given that is the IRR

$7,791 ×

PV at i for 10 periods

=

$50,000

6.418

Using the present value table, 6.418 is PV at 9% for 10 periods.

17

## ARR

### Accounting income/ Average investment

18

## NPV

### PV of net cash Inflows-PV of net cash outflows

19

## Economic Ordering Quantity

### Squre root of 2so/c where s= annual salesin units o= cost per purchase order c=carrying cost per unit

20

## Short term debt

### Discount %/100-discount% x 365 or 360/Total pay period-Discount period

21

## Cost of loan

### Interest paid/ Net funds available

22

## Net cost of debt

### Effective interest rate x (1-Tax rate)

23

## Weighted average cost of capital

### Investment structure(percentage of investments in total investments) X Cost of investment= WACC

24

## CAPM

### R+ B(m-r) C= cost of capital R=risk free rate B= Beta coefficient of Comparable publicly traded common stock, M= Market rate of return . B is referred to as particular change in stock compared to overall market change. Change in stock price /Change in market price

25

## Discounted cash flow method

### D/P + G =K Dividend next period/ Stock price + Growth

26

## ROI

###
Net profit X Asset turnover

Net Income/Sales X sales/Investment

Sales got cancelled

ROI= NI/Investment

27

## Asset turnover

### Sales/Assets

28

## Profit Margin/sales

### NI/Sales or ROI/ Investment Turnover

29

## What is the cost of funds from the sale of common stock

### Annual dividend/ Sales price of common shares - floatation costs- underpricing

30

## Residual income

###
Net income from the income statement-Required Return

Required return=NBV x Hurdle rate

First step= Average invested capital

=sales/capital turnover

Second Step= Operating income-(Imputed ratexaverage invested capital)

31

## Return on assets

### Income/Ave.Assets or income /sales or sales /avg.assets

32

## ROI

###
Net Income/ Invested Capital

Net income/sales, sales/capital investment

33

## Cost of fund from retained earnings

### Dividend /stock price

34

## Free cash flow`

### Net operating profits after taxes+ Depreciation + Amortization -Capital expenditures-net increase in WC

35

## Interest on investment

### Invested capital x required rate of return

36

## Economic value added

###
Net operating profit after taxes-cost of financing

NOPAT-(TA-CL) -WACC

37

## Cost of financing

### Total assets-current liabilities x WACC

38

## Economic rate of return on C.S

### Dividends+change in price/ Beginning price

39

## ROI based on assets

### Net Income/ Total assets or Average invested capital

40

## Du point ROI analysis=Return on sales x asset turnover

###
Return on sales= Net Income/sales

Asset turnover= Sales/total assets

41

## Market capitalization

### Common Stock price per share x common stock O/S

42

## Market Ratio

###
Common stock price per share/Book value per share

Market capitalization/ Common Stockholders Equity

43

## Cost of funds from sale of C.S

### Annual dividend/ Sale price of common share -flotation costs-underpricing

44

## Return on common equity

###
;Net income available to common shareholders /Average equity

net income available to shareholders- value of preferred stock* 6% .

Average common equity is (opening equity- preferred stock+Retained earings+Accumulatd oter comprehensive income- closing equity-Preferred stock/2

45

## Target Unit to earn a desired level of income

### Fixed cost + target income/ unit contribution margin

46

## Breakeven point in units

### Fixed cost/ contribution margin

47

## Price elasticity of demand

### % change in quantity demanded/% change in price

48

## Cost of common equity

### Expected next dividend/Current stock price + Expected growth rate

49

## CVP analysis Target unit volume

### F.C+ Target operating income/UCM

50

## Re-order Point

### Safty stock+ Lead time X sales during lead time

51

## The number of days of receivable

### 365/Account receivable turnover

52

## Contribution Margin ratio

### Revenue-Variable Costs/Revenue

53

## Break even in Dollars

### Fixed costs/ Contribution Margin Ratio

54

## Times Interest earned

###
Sales-Cost of goods sold-administrative expense-depreciation expense /interest expense

Times interest earned = (Net income before tax+ interest expense )/ Interest expense

55

## Compensating balance formula

### Effective rate= Interest rate/Usable funds

56

## Target Unit Volume(Sales revenue required)

### Fixed Costs+Target Net Income/(1.00- Tax rate)/UCM Where UCM stands for Unit Contribution Margin(Sales-Variable cost per unit)

57

## Co-efficient of variation

### Standard deviation/Expected return

58

## Sales

### Margin of safety+Break even point

59

## Degree of operating leverage

###
Change in EBIT/Change in Sales

% change in operating income/Percentage change in Unit volume

60

## Degree of financial leverage

###
% change in EPS/ % change in EBIT

EBIT/EBIT-INTEREST

61

## Excess Present value index

### present value of future net cash inflows/Initial investment X 100

62

## The amount of cash

### Equity+ Long term assets-Fixed assets-Net working capital

63

## Cost of preferred stock

###
/Cash dividend on Preferred stock/ Proceeds of preferred stock net of fees and costs

D/P(1-F) + G

64

## Economic value added

### Net operating profit after taxes-required return where required return is =Investment XWACC

65

## Average collection period

### 365/ Accounts receivable turnover

66

## Real GDP

### Normal GDP/GDP Deflator X 100

67

## COGM

### BWIP+All the costs incurred during the period-Ending WIP

68

## Costs of preferred share capital

### % of preferred stock/ preferred stock-cost of capital

69

## Applied factory Overhead

### (Variable OH+ Fixed OH)Standard DLH allowed for production

70

## Effective rate

### Interest expense/usable funds

71

## Degree of comn=bined leverage

### %change in EPS/% change in sales

72

## Effective Average interest rate

### Effective annual interest payment/Debt cash available

73

## Cost of retained earnings

###
First we have to compute dividend per share expected at eh end of the year

D/P+G = where D is annual stock dividend

This gives D1.

D1/P +G

D(as computed in first step)

P is common price pershare +G is the growth rate

74

## Cost of bond yield using the bond yield plus risk premium method

### Firms own bond yield+ Market risk premium

75

## Debt to total capital ratio

### Total Debt /Total capital(Debt +equity)

76

## Safety stock

###
First calculate daily usage

maximum lead time-usual lead time x daily usage

77

## Profitability index

### Present value of net future cash inflow/present value of initial investment

78

## GDP deflator-Real GDP

###
Nominal GDP/GDP deflator X 100

Current year real GDP/past year real GDP -1

79

## Multiplier effect

### 1/1-mpc X change in spending

80

## Net National product

### GDP- Depreciation

81

## Unemployment rate

### Number of unemployed/total labor

82

## price elasticity on demand on total units

### selling price per unit X quantity sold

83

## Cross elasticity of demand

### % Change in number of units X demanded(Supplied)/ % change in price of Y

84

## Income Elasticity of demand

### % change in number of units X demanded/ % change in income

85

## Marginal product is

### Change in Total product/ change in level

86

## Average output is

### Total product/ output

87

## Increase to scale

### % increase in output/% increase in output

88

## growth rate

### Return on equityX1-payout rate

89

## Discounted cash flow method

### Current dividend (1+G)/ current stock price +G)

90

## Bond yield risk premium

### pretax cost of long term debt+ Market risk premium

91

## Payout rate

###
Dividends per share/earnings per share

or

common stock dividends declared/income available to common stockholders

92

## Operating margin ratio

###
operating income/net sales

Operating Income= sales-cost of goods sold-selling and general administrative expenses

93

## Growth rate

### 1-payout rate(Retention ratio) X return on equity

94

## Margin of safety in percentage

### margin of safety in dollars/total sales

95