Valuation Formulas

Question 1

AR turnover

Answer 1

Sales / AR

Question 2

Avg annual growth rate (AAGR)

Answer 2

{Sum all periods sales [( CY sales / PY sales) - 1 ] / # of periods analyzed} x 100

Question 3

Avg collection period

Answer 3

365/AR turnover

Question 4

CAGR

Answer 4

{[CY sales / base year sales)(1/# of periods analyzed)]-1}x100

Question 5

current ratio

Answer 5

Current assets / current liabilities

Question 6

Debt free working capital turnover

Answer 6

Sales / debt free working capital

Question 7

Div pay out ratio

Answer 7

Div paid / net income

Question 8

DuPont Formula

Answer 8

NI / Equity = (NI / Sales)x(sales/assets)x(assets/equity)

Question 9

EVA Formula

Answer 9

EVA=NOPAT - $ WACC
EVA = EBIT x (1-t) - WACC x capital invested
EVA = (equity) x (ROE-Ke)

Question 10

Fixed Charge Coverage

Answer 10

(Net income before taxes + interest charges + long term lease payments) / (interest charges + long term lease payments)

Question 11

GP margin

Answer 11

GP/Net Sales

Question 12

Int bearing debt to equity

Answer 12

Int bearing debt / total equity

Question 13

INV turnover

Answer 13

Cogs / inventory

Question 14

Long term debt to equity

Answer 14

Long term debt / total equity

Question 15

Net profit margin

Answer 15

NI after tax / net sales

Question 16

Op profit margin

Answer 16

Op profit / net sales

Question 17

Pretax income to sales

Answer 17

Pretax income / net sales

Question 18

Pretax return on assets

Answer 18

Pretax income / total assets

Question 19

Pretax return on common equity

Answer 19

Pretax income / common equity

Question 20

Quick (acid test) ratio

Answer 20

Cash,AR,short term investments / current liabilities

Does not include inventory

Question 21

Return on common equity

Answer 21

Net income / common equity

Question 22

Return on investment

Answer 22

Net income + interest (1-tax rate) / (equity+long term debt)

Question 23

Return on total assets

Answer 23

NI + interest (1-tax rate) / total assets

Question 24

Sales to fixed assets (fixed asset turnover)

Answer 24

Sales + FA

Question 25

Sales to Total Assets (TA turnover)

Answer 25

Sales / TA

Question 26

Times interest earned

Answer 26

Earnings before interest and taxes / interest exp

Question 27

Total Debt to Total Assets

Answer 27

Total debt / total assets

Question 28

Total debt to Total equity

Answer 28

Total debt / total equity

Question 29

Total equity to Total assets

Answer 29

Total equity / total assets

Question 30

WC turnover

Answer 30

Sales / (current assets - current liabilities)

Question 31

Valuation formulas and notation system after tax cost of debt

Answer 31

Kd=marginal borrowing rate (1-marginal tax rate)

Question 32

Beta levered and unlevered

Answer 32

Bu= Bl / {1+[(1-t)(Wd/We)]} Br= Bu {1+[(1-t)(Wd/We)]}

Question 33

Build up method

Answer 33

ke= Rf + (RPm) + RPs + RPu

Question 34

Cap Rate

Answer 34

= Disc rate - long term growth rate

Question 35

CAPM

Answer 35

ke= Rf + B(RPm) + RPs + RPu

Question 36

Modified CAPM

Answer 36

ke= Rf + B(RPm) + RPs + RPu

Question 37

WACC

Answer 37

= We(ke) + Wd(kd)

Question 38

B (beta)

Answer 38

A coefficient usually used to modify a rate of return variable For public companies betas are levered Bl = levered Bu=unlevered Br=relevered

Question 39

Ke

Answer 39

Discount rate for common equity capital Generally applicable to net cash flow avail to common equity

Question 40

kd

Answer 40

After tax cost of debt

Question 41

Rf

Answer 41

Risk free rate RoR in the market free of default risk

Question 42

RPm

Answer 42

Equity risk premium Return from equity securities in excess of risk free rate

Question 43

RPs

Answer 43

Risk premium for small stock over and above any RPm RPs is avg size of the lowest quartile of NYSE as measured by market value of common equity

Question 44

RPu

Answer 44

Risk premium for unsystematic risk attributable to the specific company (specific company risk)

Question 45

t

Answer 45

Tax rate (expressed as a % of pretax income)

Question 46

We Wd g

Answer 46

We=weight of common equity in capital structure Wd=weight of debt in capital structure g = long term rate of growth