BEC Formulas (Capital Budgeting & Financial Mgmt) Flashcards Preview

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Flashcards in BEC Formulas (Capital Budgeting & Financial Mgmt) Deck (23):
1

Cash Conversion Cycle (CCC)

Inventory Conversion Period (ICP) + AR Collection Period (RCP) - AP Deferral Period (PDP)

2

Inventory Conversion Period (ICP)

avg inventory / COGS per day

3

A/R Collection Period (RCP)

avg A/R / avg credit sales per day

4

A/P Deferral Period (PDP)

avg A/P / purchases per day (or COGS/365)

5

Number of days sales in A/R

360 / A/R turnover

6

Inventory Reorder Point

avg daily demand x avg lead time = reorder point without safety stock + safety stock = reorder point with a safety stock

7

Economic Order Quantity

Square root of:

2 x annual usage on inventory x cost of placing an order / cost of storing an individual unit of inventory

8

Number of days supply in avg inventory

360 / inventory turnover

9

Payback Period

initial investment / after tax annual net cash flows = number of years

10

Internal Rate of Return (IRR)

investment / annual cash flows = PV factor

11

Accounting Rate of Return

acctg income / avg investment = ROI

12

NPV

PV cash inflows - PV cash outflows / net PV

if positive it's good
if negative it's bad

13

Annual Financing Cost (AFC)

discount % / (100% - discount %) x 365 / (total pay period - discount period)

14

Current Yield

annual interest paid / bond market price

15

Operating Leverage (DOL) : measures how the size of a business's fixed costs affects its performance when revenues change

% change in EBIT / % change in sales volume

16

Financial Leverage (DFL) : measures how much a business relies on debt financing

% change in EPS / % change in EBIT
or
% change in NI / % change in operating income

17

Cost of Debt Financing : after- tax cost of interest payments as measured by yields to maturity

Can be calculated 2 ways:

yield to maturity x (1 - eff. tax rate)
or
(int exp - tax deduction for interest) / CV of debt

18

Cost of Preferred Stock Financing

dividend / net issue price

19

Capital Asset Pricing Model (CAPM)

risk free rate + [ (expected market rate - risk free rate) ] x beta]

20

Divident Yield Plus Growth Rate: adds the current dividend (as a % of stock price) and the expected growth rate in earnings

net expected dividend / current stock price + expected growth in earnings = dividend yield plus growth rate

21

Cost of New Common Stock

net expected dividend / (current stock price - float costs) + expected growth in earnings = cost of new C/S

22

Profitability Index: provides a means to rank capital projects with differing amounts of investment.

PI = PV of Benefits / Cost

23

Cost of Common Equity

(dividend / share price) + growth percentage