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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

Operating cash flow ratio

cash flow from operations/current liablities