Equations/Ratios/Definitions Flashcards Preview

Series 7 - Details > Equations/Ratios/Definitions > Flashcards

Flashcards in Equations/Ratios/Definitions Deck (29):
1

What is formula for computing the combined equity in an account that has long and short positions?

(Long Market Value - Debit Balance) + (Credit Balance - Short Market Value)

2

What is the formula for determining equity in a short margin account?

Credit Balance (CR) - Short Market Value (SMV) = Equity (EQ)

3

What is the credit balance in a short margin account?

-Represents all of the cash that is being deposited based on the short sale.
-Two components that make up the credit balance are the total proceeds generated by the short sale plus the original margin requirement on the value of the short sale.

4

What is the short market value in a short margin account?

It is the current market value of the securities that have been sold short.

5

What is the formula for determining equity in a long margin account?

Long Market Value (LMV)- Debit Balance (DB) = Equity (EQ)

6

What is the debit balance in a long margin account?

The amount the customer borrowed from and currently owes the brokerage firm.

7

What is the formula for determining how many index options contracts a person needs to buy to hedge a portfolio against downside risk?

(Portfolio Value / (Index value x $100)) x Portfolio Beta

8

What is the VIX?

The CBOE's Volatility Market Index - Broad-based index option that is calculated using bid and ask quotes of the S&P Index options. The VIX weights both the nearby and second nearby options that have at least 8 days to expiration to produce a 30-day measure of the volatility of the S&P Index.
-European style exercise
-2.5 point strike price intervals

9

What is the formula for determining the Public Offering Price (POP)?

NAV / (100% - Sales Charge %)

10

What is the formula for EPS?

(Net Income - Preferred Dividends) / Number of shares of common stock outstanding)

11

What is the formula for finding the sales charge ($)?

Offering price - NAV

12

What is the formula for finding the sales charge (%)?

Sales charge / Offering price.

13

What is the formula for finding the after-tax return for a corporation on a dividend?

For most dividends (when company does not own more than 20%):
Dividend yield x (100% - (30% x Tax Bracket %)

14

What is the formula for determining how much stock is outstanding?

Issued stock - Treasury Stock = Outstanding Stock

15

What is the formula for finding a stock's current yield (dividend yield)?

Annualized dividend per share / current market price

16

What are current assets?

They represent cash and other items that may be converted into cash within a short period (usually one year).

17

What is the formula for operating profit margin?

Net Operating Income / Sales.

18

What is the formula for the bond coverage ratio?

EBIT / Interest Expense

19

What is the net working capital ratio formula?

Total Current Assets (CA) - Total Current Liabilities (CL)

20

How is the current ratio calculated?

Total Current Assets / Total Current Liabilities

21

How is the quick asset (Acid Test) ratio calculated?

(Total Current Assets - Inventory) / Total Current Liabilities

22

How is the cash flow ratio calculated?

Net Income (or Loss) + Annual Depreciation

23

How is a company's long-term capital calculated?

Long-term liabilities plus stockholder's equity

24

What is the formula for the bond ratio?

Par Value of Bonds / Total Long-Term Capital

25

What is the formula for the common stock ratio?

(Common Stock at Par + Capital Surplus + Retained Earnings) / Total Long-Term Capital

26

What is the formula for the debt-to-equity ratio?

Debt / Shareholder equity (part value of common stock + Capital surplus + retained earnings)

27

What is the formula for book value per common share?

(Total Assets - (Intangibles + Total Liabilities + Preferred Stock)) / Number of Outstanding Common Shares

28

What is the return on common equity formula?

(Net Income - Preferred Dividends) / (Common stock at par + capital surplus + retained earnings)

29

What is the formula for the dividend payout ratio?

Annual Dividend Paid on Common Stock / Earnings Per Share