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CFA L1 Formulas > Formulas > Flashcards

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1
Q

Real Exchange Rate =?

A

nominal FX rate * (base currency CPI/ price currency CPI)

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2
Q

No-Arbitrage Forward Exchange Rate =?

A

Forward/Spot = 1+price currency IR / 1+base currency IR

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3
Q

Basic EPS =?

A

( net income - pref divs)/ weighted avg no. common shares outs…

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4
Q

Diluted EPS =?

A

Adj income available for common shares/ Weighted average common shares + potential common shares outstanding

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5
Q

Current Ratio =?

A

Current Assets/Current Liabilities

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6
Q

Quick Ratio =?

A

(Cash + Marketable Securities + Receivables)/Current Liabilities

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7
Q

Cash Ratio =?

A

(Cash + Marketable Securities)/Current Liabilities

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8
Q

Defensive Interval =?

A

(Cash + Marketable Securities + Receivables)/Daily Cash Expenditures

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9
Q

Receivables Turnover =?

A

Annual Sales/Average Receivables

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10
Q

Inventory Turnover =?

A

COGS/Average Inventory

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11
Q

Payables Turnover Ratio =?

A

Purchases/Average Trade Payables

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12
Q

Days of Sales Outstanding =?

A

365/Receivable Turnover

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13
Q

Days of Inventory on Hand =?

A

365/Inventory Turnover

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14
Q

Number of Days of Payables =?

A

365/Payables Turnover Ratio

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15
Q

Cash Conversion Cycle =?

A

Days of Inventory on Hand + Days of Sales Outstanding - Number of Days of Payables

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16
Q

Total Asset Turnover =?

A

Revenue/Average Total Assets

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17
Q

Fixed Asset Turnover =?

A

Revenue/Average Fixed Assets

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18
Q

Working Capital Turnover =?

A

Revenue/Average Working Capital

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19
Q

Gross Profit Margin =?

A

Gross Profit/Revenue

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20
Q

Operating Profit Margin =?

A

Operating Profit/Revenue OR EBIT/Net Sales

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21
Q

Net Profit Margin =?

A

Net Income/Revenue

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22
Q

Return on Assets (Total Capital) =?

A

EBIT/Average Total Capital

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23
Q

Debt-to-equity ratio =?

A

Total Debt/Total Equity

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24
Q

Total-Debt-Ratio =?

A

Total Debt/Total Assets

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25
Interest Coverage =?
EBIT/Interest
26
Fixed Charge Coverage =?
(EBIT + Lease Payments)/(Interest + Lease Payments)
27
Growth Rate (g) =?
RR * ROE
28
Retention Rate =?
1 - (dividends declared/operating income after tax)
29
Traditional DuPont Equation, ROE =?
(Net Income/Sales)*(Sales/Assets)*(Assets/ Equity) OR (Net Profit Margin)*(Asset Turnover)*(Equity Multiplier)
30
Extended DuPont Equation =?
(Net Income/EBT)*(EBT/EBIT)*(EBIT/Revenue)*(Revenue/Avg Total Assets)*(Avg Total Assets/Avg Equity) OR: ROE = tax burden × interest burden × EBIT margin × asset turnover × leverage
31
Return on Invested Capital (ROIC) =?
Net Operating Profit After Tax/Average Book Value of Total Capital
32
WACC =?
WACC = (wd)[kd(1 – t)] + (wce)(kce)
33
CAPM =?
= Rf + Beta(Rm-Rf)
34
Leverage Factor =?
1/Margin %
35
Levered return =?
HPR*Leveraged Factor
36
Margin Call Price =?
P(1 - initial margin %)/1 - maintenance margin %
37
Price Weighted Index =?
Sum of Stock Prices/Adjusted Divisor
38
Value-weighted Index =?
(∑current prices*#shares)/(∑base year prices*#base year shares) x base value
39
One Period Valuation Model =?
D1/(1+ke) + P1/(1+ke)
40
Supernormal growth model (multi-stage) DDM =?
D1/(1+ke) + Dn/(1+ke)^n + Pn/(1+ke)^n where Pn = Dn+1/(ke-gc)
41
Constant growth model: =?
D0(1+gc)/(ke-gc) = D1/ke-gc
42
Earnings Multiplier Model
P0/E1 = (D1/E1)/k-g = payout ratio/k-g
43
Leading P/E =?
Price per share/Forecast EPS over next 12 months
44
Trailing P/E =?
Price per share/EPS over previous 12 months
45
P/B =?
Price per share/Book value per share
46
P/S =?
Price per share/Sales per shares
47
P/CF =?
Price per share/Cash flow per share
48
Haircut =?
1 - 1/InitialMargin
49
Flat Price of a Bond =
Full Price - Accrued Interest
50
Accrued Interest of a Bond =?
coupon payment * (days from last coupon to settlement/days in coupon period)
51
What does a 1y3y mean?
A 3 year forward rate, 1 year from now
52
Approximate Modified Duration =?
(V-)-(V+)/ (2×V0×ΔYTM) where: V0 = the initial price V− = the price of the bond if YTM is decreased by ΔYTM V+ = the price of the bond if the YTM is increased by ΔYTM
53
Approximate Convexity =?
(V-)+(V+)-(2V0)/ V0×(ΔYTM)^2 where: V0 = the initial price V− = the price of the bond if YTM is decreased by ΔYTM V+ = the price of the bond if the YTM is increased by ΔYTM
54
Percentage Change in full Bond Price =?
(−annual modified duration*ΔYTM) +(0.5*annual convexity * (ΔYTM)^ 2)
55
Money Convexity =?
annual convexity × full price of bond position
56
Effective Convexity =?
(V-)+(V+)-(2V0)/ V0×(Δcurve)^2
57
Effective Duration =?
(V-)-(V+)/(2×V0×Δcurve)
58
With convexity adjustment, what is the change in the full bond price?
− (effective duration)(Δcurve) + (1/2)(effective convexity)(Δcurve)^2
59
Forward Contract Value =?
Vt(T) = [St + PVt(costs)– PVt(benefits)] – F0(T)*(1 + Rf)^–(T–t)
60
Intrinsic Value of a Call Option?
= Max[0, S – X]
61
Intrinsic Value of a Put Option?
Max[0, X – S]
62
European Put Call Parity Relationship =?
c + X(1 + Rf)^-T = S + p
63
Contango =?
Futures Price > Spot Price
64
Backwardation =?
Futures Price < Spot Price
65
Annualised return =?
(1+HPR)^365/days -1
66
Continuously Compounded Return =?
= ln (1+HPR)
67
Nominal Risk Free Rate =?
nominal risk-free rate ≈ real risk-free rate + expected inflation rate.
68
Geometric Mean Return =?
=n√(1+R1)×(1+R2)×..×(1+Rn)-1
69
Harmonic Mean Return =?
number of observations/sum of the reciprocal of each number in the series. Often used for calculating average cost of shares over time.
70
Coefficient of Variation=?
Standard Deviation/Arithmetic Mean
71
Target Downside Deviation =?
Starget=⎷n∑alXi–B * (Xi–B)^2/(n–1) where B = the target
72
Bayes Formula =?
P(A|B) = P(B|A)/P(B) × P(A)
73
Correlation (A,B) =?
Covariance A,B/(std dev A * std dev B)
74
Variance of a 2 stock portfolio
VarP= w^2Aσ^2A+w^2Bσ^2B+ 2wAwBCovA,B
75
How to calculate covariance of two assets in a portfolio?
CovA,B = E{[RA − E(RA)][RB − E(RB)]}
76
Roy's safety first criterion =?
SFRatio=(E(Rp)−RL)/σp
77
In a normal distribution, 68% of observations fall within how many s?
68% of observations fall within ± 1s
78
In a normal distribution, 90% of observations fall within how many s?
90% fall within ± 1.65s.
79
In a normal distribution, 95% of observations fall within how many s?
95% fall within ± 1.96s.
80
In a normal distribution, 99% of observations fall within how many s?
99% fall within ± 2.58s.
81
How do we calculate a z-score?
z = (observation - population mean)/ standard deviation
82
How do we find R^2 =?
R^2 = SSR / SST
83
How do we find Mean Squared Error (MSE)?
MSE= SSE/n-2
84
How do we find the standard error of estimate? What does it mean for the model fit?
SEE= √MSE where a lower SEE means a better model fit
85
How do we calculate the F-statistic, and what is this used for?
F = MSR / MSE we can use to test whether the slope coefficient is statistically significant.
86
When is a z test used?
z-test is used to determine whether two population means are different when the variances are known and the sample size is large
87
When is a paired comparisons test used?
A paired comparisons test is appropriate to test the mean differences of two samples believed to be dependent
88
When is a chi-squared test used?
a chi-square test is used for tests concerning the variance of a single normally distributed population.
89
When is an F-Test used?
to test the difference between the variances of two normally distributed populations with random independent samples
90
When is a non-parametric test appropriate?
When the samples consist of ranked values, parametric tests are not appropriate. In such cases, nonparametric tests are most appropriate.
91
When would you not use a parametric test?
Numerical Values- particularly with a large sample size
92

CFA L1 Formulas (3 decks)

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