Formula Flashcards
Rights value (ex-rights) formula（Used on or after ex-date）
Rights needed per new share
Rights value (cum-rights) formula （Used prior to ex-date）
Rights needed per new share +1
Dividend payout ratio=
annual earnings per share
*part of fundamental analysis
Current Ratio
=current assets / current liabilities
Measures ability to pay short-term obligations
*part of fundamental analysis
Net working capital
=current assets - current liabilities
Determines liquid cash and marketable assets on hand
*part of fundamental analysis
Quick assets
QA=current assets - inventory
like looking in the wallet of a company.
*part of fundamental analysis
Quick ratio
Also known as the acid test ratio
Used to determine a company’s liquidity
=current assets - inventory / current liabilities
*part of fundamental analysis
Debt service coverage ratio
=net operating income/debt service requirements
Measures ability to pay debts
*part of fundamental analysis
net operating income
= gross income (profit) - operating expenses
*part of fundamental analysis
Earnings per share (EPS)
= (Net income - pref divs) / ( Outstanding shares)
net income=gross - expenses
MINUS pref div = earnings avilable to common stock shareholder
*part of fundamental analysis
Price-to-earnings (PE) ratio
Compares a security’s market price to earnings
=COMMON STOCK Market price/EPS
High PE Ratio (v.s. low)
**May indicate an overpriced investment (v.s. underpriced)
***Typical of growth companies (v.s. value comp)
*part of fundamental analysis
Conversion ratio
=Par/Conversion Price
Conversion Price
=Par/Conversion Ratio
Parity price of preferred stock
=common stock market price “x” conversion ratio
Nominal yield
= Annual income / Par
Current yield
= Annual income / Market price
Stock parity price
Bond parity price
（Convertible bonds）
SPP=（bond market price） /（conversion ratio）
BPP=stock price x conv. ratio
Debt service coverage ratio
DSCR
=(net operating income) / (debt service requirement)
Measures ability to pay debts
