Securities formulas

Question 1

conversion premium =

Answer 1

warrant price + exercise price - current share price

Question 2

flat yield =

Answer 2

gross annual coupon/market price

Question 3

GRY =
(gross redemption yield)

Answer 3

flat yield + p/l at redemption [((NV-par)÷years to maturity)/price]

Question 4

value of a bond =

Answer 4

£coupon/(1+r)^n +….+£coupon+£redemption/(1+r)^n

Question 5

conversion ratio =

Answer 5

nominal value/conversion price of shares

Question 6

IRP =

Forward rate =

Answer 6

(1+r variable) / (1+r base)

spot x (1+rv)/(1+rb)

Question 7

current ratio =

Answer 7

current assets / current liabilities

Question 8

NAV (per ordinary share) =

Answer 8

(assets-liabilities) / no. of ordinary shares

Question 8

capital expenditure is

Answer 8

money spent on non-currents assets

Question 9

revenue expenditure is

Answer 9

expenditure on the income statement e.g. wages, rent, fees

Question 10

EPS (earnings per shares) =

Answer 10

profit left for ordinary shareholders / no. ordinary shares

i.e. net profit - preference share dividends / weighted no. ordinary shares outstanding

Question 11

historic/current/prospective price earnings ratio =

(aka P/E ratio)

Answer 11

market price per share / earnings per share

Question 12

EV/EBITDA =

(enterprise value/EBITDA)

Answer 12

EV/EBITDA

EV = market value of debt + mv of equity

Question 13

theoretical nil-paid price =

Answer 13

TERP - subscription price

Question 14

TERP =

Answer 14

(share price x no. of shares + rights issue x no. of rights issue shares) / total number of shares the holder has

Question 15

dividen yield =

Answer 15

dividend / market value

Question 16

dividen cover =

Answer 16

earnings per share /dividen per share

Question 17

gearing =

Answer 17

interest-bearing debt / equity shareholder funds

Question 18

interest cover =

Answer 18

profit before interest & tax / interest expense

Question 19

quick ratio =

Answer 19

(current assets - inventory) / current liabilities

Question 20

maximum nil-paid rights =

Answer 20

total cost of all rights issue shares / TERP

Question 21

return on capital employed (ROCE) =

Answer 21

operating profits / capital employed

Question 22

capital employed =

Answer 22

total assets - CURRENT liabilities
or equity + non-current liabilites

Question 23

return on equity =

Answer 23

net income / shareholders’ equity

Question 24

profit margin =

Answer 24

profit /revenue

Question 25

annual depreciation =

Answer 25

(original cost - expected residual value) / expected useful life

Question 26

NBV =
(net book value)

Answer 26

csot - depreciation

Question 27

CFO =
(operating cash flow)

Answer 27

operating profit + depreciation - inventory - receivables + payables

Question 28

earnings yield (EY) =

Answer 28

profit/price = 1/PE = DCxDY

Question 29

FCFF =

Answer 29

CFO - CAPEX + interest paid

Question 30

FCFE =

Answer 30

CFO - CAPEX +CF issuing bond - CF of redeem bonds

Question 31

NAV =

Answer 31

assets - liabilities

Question 32

NAV per share =

Answer 32

(assets - liabilities) / no. of shares