Fundamental Analysis Formulas Flashcards
Formula for Net Worth
Assets - liabilities
Net worth = assets - liabilities
Formula for book value
Net worth - (preferred and intangibles)
Book value = net worth - preferred - intangibles
•Can be thought of as the NAV of a company
Formula for: Book value per share
Book value / number of outstanding common shares
or
(Net worth - preferred - intangibles) / number of outstanding common shares
- Indicates a firms NAV on a per share basis
- Book value = net worth - (preferred and intangibles)
Formula for dividend yield
Annual dividend / CMV
Example: stock trading @ $42 pays $2 annual dividend.
$2 / $42 = 4.76% dividend yield
Formula for current assets
Cash and equivalents + accounts receivable + inventory
Measures liquidity, shows assets that can be turned to cash within 1 year
Formula for current liabilities
Accounts payable + accrued wages and taxes payable
Formula for working capital
Current assets - current liabilities
- Amount of capital a company can readily use for day to day operations
- Measures liquidity, operational efficiency, and short term financial health
Formula for current ratio (aka “working capital ratio”)
Current assets / current liabilities
•company’s ability to pay short term debts with current assets
Formula for total capitalization
Long term debt + net worth
Total capitalization = long term debt + net worth
Formula for debt ratio
Long term debt / total capitalization
or
Long term debt / (long term debt + net worth)
- Measures amount of leverage used by company
- Total capitalization = long term debt + net worth
Formula for EPS
Earnings available to common / total outstanding common shares
Formula for P/E ratio
CMV / Earnings per share
•EPS = earnings available to common / total outstanding common shares
Formula for dividend payout ratio
Common dividends / EPS
•EPS = earnings available to common / total outstanding common shares
Are dividends payable a current liability?
Yes
Current liability
