Formula sheet for corporate finance PDF

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Formula SheetChapter 2Profitability Ratios(1) Gross Margin = ���������� ����������������������(2) Operating Margin = ������������������ ����������������������(3) Net Profit Margin = ������ ����������������������Liquidity Ratios(1) Current Ratio = �������������� ������������������������������������ �...

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Formula Sheet Chapter 2 Profitability Ratios (1) Gross Margin =

𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 𝑆𝑎𝑙𝑒𝑠

(2) Operating Margin = (3) Net Profit Margin =

𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒 𝑆𝑎𝑙𝑒𝑠 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑆𝑎𝑙𝑒𝑠

Liquidity Ratios (1) Current Ratio = (2) Quick Ratio = (3) Cash Ratio =

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠−𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 𝐶𝑎𝑠ℎ

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Efficiency and Working Capital Ratios (1) Accounts Receivable Days = (2) Fixed Asset Turnover = (3) Total Asset Turnover = (4) Inventory Turnover =

𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐷𝑎𝑖𝑙𝑦 𝑆𝑎𝑙𝑒𝑠

𝑆𝑎𝑙𝑒𝑠 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠 𝑆𝑎𝑙𝑒𝑠 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

Interest Coverage Ratios (1) EBIT/Interest Coverage =

𝐸𝐵𝐼𝑇 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒

(2) EBITDA/Interest Coverage =

Leverage Ratios

𝐸𝐵𝐼𝑇𝐷𝐴 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑠𝑒

(1) Book Debt-to-Equity Ratio =

𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡 𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦

(2) Market Debt-to-Equity Ratio = (3) Debt-to-Capital Ratio =

𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦+𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡 𝑁𝑒𝑡 𝐷𝑒𝑏𝑡 𝐸𝑛𝑡𝑒𝑟𝑝𝑟𝑖𝑠𝑒 𝑉𝑎𝑙𝑢𝑒

(4) Debt-to-Enterprise Ratio = (5) Equity Multiplier =

𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡 𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦

𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦

Operating Returns (1) Return on Equity = (2) Return on Assets =

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒

𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

(3) Return on Invested Capital (ROIC) =

𝐸𝐵𝐼𝑇(1−𝑇𝑎𝑥 𝑅𝑎𝑡𝑒) 𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦+𝑁𝑒𝑡 𝐷𝑒𝑏𝑡

Valuation Ratios (1) Market-to-Book Ratio =

𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦 𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦

(2) Price-to-Earnings Ratio =

𝑆ℎ𝑎𝑟𝑒 𝑃𝑟𝑖𝑐𝑒 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒

Chapter 4 - Time Value of Money Present value of an annuity = C *

1

r

1

(1 − (1+𝑟)𝑁 )

1

Future value of an annuity = 𝐶 ∗ ((1 + 𝑟)𝑁 − 1) 𝑟

Present value of a growing annuity = 𝐶 ∗ Present value of perpetuity =

Chapter 5 – Interest Rate

(1 − ( 𝑟−𝑔

𝐶 𝑟

Present value of growing perpetuity =

1

𝐶 𝑟−𝑔

1+𝑔 𝑁 1+𝑟

) )

EAR= (1 +

𝐴𝑃𝑅 𝑚 𝑚

) −1

Chapter 6 – Bond Valuation 1

1

Value of bond = 𝑐𝑜𝑢𝑝𝑜𝑛 𝑝𝑒𝑟 𝑝𝑒𝑟𝑖𝑜𝑑 ∗ 𝑟 (1 − (1+𝑟)𝑛 ) + Face value *

1

(1+𝑟)𝑛

Chapter 7 – Stock Valuation Expected return = Dividend yield + Capital gain yield

Dividend yield =

𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑1

𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡

and Capital gain yield =

𝑃𝑟𝑖𝑐𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡

1 – dividend payout ratio = retention ratio Sustainable growth rate (g) = Return on new investment * Retention ratio

Constant Growth Model:

𝑃𝑛 =

𝐷𝑖𝑣𝑛+1 𝑟−𝑔

Dividend Discount Model P0 

Div1 Div 2  2  1  rE 1  rE 



Div N N

1  rE 



PN

1  rE N...