Formulas Flashcards by Jennifer Gibson

What is the formula for the price elasticity of demand?

Percent change in quantity demanded/ percentage change in price

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The point method measure the price elasticity of demand for specific change in the product’s price. What is the formula?

%Q= Quantity demanded after the change - quantity demanded before the change/ quantity demanded before the change.
%P = Price after the change - price before the change/price before the change.
%E = %Q/QP

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What s the midpoint method (arc Method) formula for elasticity of demand?

%E= ((Q1-Q2)/(Qz+Q2))/((P1-p2)/(P1+P2))

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How do you evaluate the elasticity of demand?

Greater than = relatively elastic
Equal to one - unitary elastic
Less than one = Relatively inelastic
Infinite = perfectly elastic

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What is the formula for elasticity of supply?

%E= Percentage change in quantity supplies/percentage change in price

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What is the formulat for Net Exports

Exports - imports

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What is the formula for real GDP

nominal GDP/price index

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What is the formula for GDP expenditures approach

consumer spending+investment spending+government spending+Net exports

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What is the formula for GDP Income approach

salaries+rents+interest+proprietor/partnership income+corporate profits= national income
National income+indirect business taxes+net foreign factor income(+-) capital consumption allowance.

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What is the formula for inflation

current year price index- prior year price index/prior year price index

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What is the formulat for consumer price index

cost of market basket in current year/ cost of market basket in base year.

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What is the formula for the multiplier

1/(1-mPC)

MPC=Marginal propensity to consume

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What is the formula for the monetary multiplier

1/required reserve ratio

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What is the formula for rate of return?

return on investment/amount invested

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What is the formula for expected rate of return?

sum (possible rate of return x probability)

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What is the standard deviation of return

square root( sum(R1 - expected rate of return)squared x probability)

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What is the coefficient of variation

Standard deviation/expected rate of return

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How do you analyze the coefficient of variation

The lower the ratio the better the risk return tradeoff

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How do you analyst the coefficient of correlation?

1 means the two variables always move together.

-1 means the two variables move in opposite direction.

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What is the Capital Asset pricing model (CAPM)?

required rate of return= risk free rate+beta(market risk-risk free rate)

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What is the degree of operating leverage formula?

DOL= % change in earnings before interest and taxes/ % change in sales

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How do you analyze DOL>?

High percentage of fixed costs is more risky than a firm in the same industry that relies on variable costs.

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What is the formula for degree of financial leverage (DFL)?

%change in EPS/ % change in earnings before interest and taxes.

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What is the formula for degree of total leverage?

DTL= % change in EPS/% change in sales

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What is the common stock valuation

dividend per share+ required rate of return

What is the constant growth model

dividends per share expected next year/( required rate of return- growth rate)

What is the formula for Weighted average cost of capital (WACC)?

((market value equity/equity+debt)xcost of equity))+((debt//equity+debt) x cost of debt) x (1- tax rate)

What is the current ratio

current assets/current liabilities

What is the quick ratio (acid test)

Current assets-inventory-prepaid/current liaibilites

How do you analyze the current and quick ratio

The higher the percentage means the firm is more liquid. However, an overally high ratio could mean the firm is not effiectively using its resources.

What is the formula for AR Turnover

net credit sales/Avg Balance in receivables

What is the formula for days sales in receivables

365/AR turnover ratio

What is the formula for inventory turnover

COGS/avg balance in inventory

What is the formula for days sales in inventory

365/inventory turnover ratio

What is the formula for total cost of inventory?

purchase costs+ carrying costs+ordering costs+stockout costs

What is the formula for the reorder point?

(average daily demand x lead time in days) + safety stock

What is the formula for the economic order quantity model

EOQ= square root ( 2 x ordering cost x demand in units/carrying costs)

What is the formula for operating cycle?

days sales in receivables + days sales in inventory

What is the formula for for the cash conversion cycle?

avg collection period+ days sales in inventory- avg payables period

What is the formula for accounts payable turnover?

cogs/ avg balance in AP

What is the formula for avg payable period?

365/ AP turnover

What is the Calculation of no taking the discount in spontaneous financing?

(discount %/100-discount%)x(days in the year/total payment period -discounter period. Typically around 36.73%?

What is the formula for simple interest expense on loans?

Interest expense = principla of loan x stated rate

What is the formula for effective interest rate of a loan?

interest expense/usable funds

What is the formula for total borrowings of discounted loands

amount needed/ (1 - stated rate)

What is the formula for to figure out effect rate on a discounted loan?

stated rate /(1-stated rate)

What is the formula for to figure out the effective rate with compensating balances

stated rate / (1- compensating balance %)

What is the formula for accounting rate of return?

annual cash inflow - depreciation/initial investment

What is the formula for the payback period?

initial investment/annual after tax savings

What is the formula for profitability index?

PV of future net cash flows or NPV of proj/ initial investment

What is the formula for return on investment (ROI)?

Operating income/average invested capital or Operating income/ total assets.

What is the formula for return on investment component view?

(operating income/sales) x (sales/average invested capital)

What is the formula for residual income?

operating income-target return on invested capital

What is the formula for return on assets (ROA)?

net income/average total assets

What is the formula for return on common equity (ROCE)?

NI-Preferred dividends/average common equity

What is the formula for Price-earnings ration (P-E ratio)?

Market price of share/eps *higher the ratio the more the confidence the market has in the firm's ability to provide higher returns to investors

What is the formula for economic rate of return on Common Stock?

dividends+change in share price/beg share price

What is the formula for Economic value added (EVA)?

after-tax operating income - (initial investment x cost of capital)

What is the formula for times interest earned ratio?

earnings before interest and taxes (EBIT)/ interest expense

What is the formula for Total debt to total capital ratio

total debt/total capital *Low is viewed favorable by creditors because the equity cushion

What is the formula for Debt to equity?

total debt/shareholders equity *Low ratio is low risk

What is the formula for Long term debt to total equity ratio?

long term debt/shareholders equity *low ratio better chance for financing

What is the formula for Weighted Average method EUP

beginning WIP costs+current period costs/EUP | EUP=Total units completed+ending WIPx%complete

What is the formula for FIFO EUP

current period costs/EUP | EUP= beg WIP x % left to complete+started &completed units+ending WIP x% complete

What is the formula for direct materials price variancd

acctual aty purchasedx(standard material price- actual materials price)

What is the formula for direct materials quantity variance

(standard quantity of input allowed-actual quantity consued)x standard materials price

What is the formula for direct labor rate variance

actual hours worked x (standard hourly rate-actual hourly rate)

What is the formula for direct labor efficiency variance

(standard number of hours allowed-actual number of hours worked)x standard hourly rate

What is the formula for VOH spending variance

Actual VOH-(AQ X SP)

What is the formula for VOH efficiency variance

(EQ - AQ) X SP

What is the formula for FOH applies

(actual FOH incrurred - FOH applied

What is the formula for FOH Spending Variance

actual FOH incurred-amount budgeted

Formulas Flashcards

(72 cards)