FIN2004X Cheat Sheet Capital Gain Yield = Cap Gain/Initial Price Corporate Finance Investment Returns Dollar :Amt

Recd - Amt invst Dividend Yield = Div/Initial Share Price Capital budgeting (invest) % rtd :(Amt Recd-Amt invst)/Amt invst Total return = div yield + cap gain yield Capital structure (fund) 1 + real return = (1 + nominal return)/(1 + inflation rate) Working capital mgt (liquid) Accting Standards Expected Returns Mkt Cap = Share Price x No. of Outstding Shares Expected r^ = Summation(riPi) Mkt Value of Assets = Mkt Cap + Mkt Val of Debt (same as book) Arithmetic average return = Sum of (rt)/t Enterprise Value = Mkt Value (Equity + Debt) Excess Cash Volatility=Sqrt[Sum of(ri-Expected r)^2(Pi)] Est Volatility=Sqrt[Sum of(rt-Avg r)^2/n-1] Sources of cash (Use of Cash): decreases(increase) in assets (other than cash) CV = Standard Deviation/Expt r (risk/unit of rtd) increases(decrease) in equity and liabilities. risk premium=excess return over the risk-free rate Weighted r=Sum of (wir^i) w must add up to 1 Portfolio r=Sum of(port ri*Pi) stock Portf Volatility = Sqrt[Sum of(ri-Expected r)^2(Pi)] Cash Flow From Assets = Operating Cash Flow (OCF) Alt Portf Risk= sqrt[w^2(risk1^2)+(1-w)(risk2^2)+2w(1-w)Cov(risk1)(risk2)] Net Capital Spending (NCS) Changes in NOWC OCF = EBIT + Depreciation (EBIT*Tax Rate) Cash Flow From Assets (CFFA)* + Interest Tax Shield = NCS = Ending Net Fix Assets Begin Net Fix Assets + Depreciation Cash Flow to Creditors + Cash Flow to Stockholders Changes in NOWC = Ending NOWC Beginning NOWC Cash Flow to Creditors (B/S and I/S) = interest paid net new borrowing (LT Debt and Notes Payable) Cash Flow to Stockholders (B/S and I/S) = dividends paid net new equity raised Cap line=rp=rf+(rm-rf)/std m *std p Liquidity Ratio Expected Returns Covariance=Sum of [Prob(s)*(Ri-E(ri))*(Rj-E(rj))] Cash Ratio = Cash / CL Total Risk(Volatility)=Co. Spec risk(UnSystem)+Mket Risk(System) NWC to Total Assets = NWC / TA Interval Measure = CA / average daily operating costs Beta(market risk)=Covariance of invstment rtd with rtds of Financial Leverage Ratio mkt/mkt portf variance Required ri=rrf+(rm-rrf)betai Total Debt Ratio = Total Debt / Total Assets Debt/Equity Ratio = (total assets total equity) / total equity (Compound rtd)Geometric Equity Multiplier = total assets/total equity mean=[(1+r1)(1+r2)(1+r3)..(1+rn)]^n - 1 Long-Term Debt Ratio = long-term debt / (long-term debt + total equity) Risk to Rewards - (Rm-Rf) is the market Times Interest Earned Ratio = EBIT / interest premium for each unit of beta Portf Beta=Sum of (Wi*betai) Cash Coverage Ratio = (EBIT + depreciation) / interest Inflation Increase the Required Return by the same amount - rrf is affected Asset Mgt Ratio When investors are more risk adverse, the risk premium increase - (rm-rrf) Inventory Turnover = COGS / Inventory Days Sales in Inventory = 365 / Inventory Turnover Portf that gives the greatest rtd for a given risk is called efficient Rec. turnover = Sales / Receivables Any asset combo is efficient as long as it is above the Mini Days Sales Outstanding = Account Receivable/Average Daily Sales (Sale/365) Variance Portf, this is Efficient Frontier FA Turnover = Sales / Net fixed assets Type of Loans Profitability Ratio Pure Discount Loans No interest Profit margin = Net income / Sales Interest Only Loans - Principal paid at end BEP (Basic Earning Power) = EBIT/Total assets Loans with Fixed Principal Payments ROE = Net income*(if there's preferred, remove it) / Total common equity Amortized Loans - Varying Portion of Mkt Ratio principal paid at end P/E = Price / Earnings per share Time Value of Money M/B = Mkt price per share / Book value per share APR = period rate * the number of periods per year The Dupont System EAR = [1+APR/m]^m -1 where m is compounding ROE = PM * TA TO * EM ((NI / Sales) (Sales / TA) (TA / TE)) frequency per year Time Value of Money FVn = PV(1 + i)n i = (FV / PV)1/n 1 t = ln(FV / PV) / ln(1 + r) PV of Perpetuity = Constant CF/r Ordinary Annuity (1+i) = Annuity Due PV of growing Perpetuity = C1/r-g Ordinary Annuity PV = PMT*(1/r*(1-1/(1+r)^n)) FV= PMT * [1/r*[(1+r)^n-1]]

Lecture 1-5