FORMULA SHEET

CASH FLOWS
Operating cash flow (OCF) = EBIT + depreciation – taxes
Net capital spending (NCS) = purchases of fixed assets – sales of fixed assets
or
NCS = ending net fixed assets – beginning net fixed assets + depreciation
Changes in NWC = ending NWC – beginning NWC
Cash Flow to Creditors and Stockholders
Cash flow to creditors = interest paid + retirement of debt – proceeds from new debt
or
Cash flow to creditors = interest paid – net new borrowing
= interest paid – (ending long-term debt – beginning long-term debt)
Cash flow to stockholders = dividends paid + stock repurchases – proceeds from new stock issues
or
Cash flow to stockholders = dividends paid – net new equity raised = dividends paid – (ending common stock,
APIC & Treasury stock – beginning common stock, APIC & Treasury stock)

SHORT-TERM SOLVENCY RATIOS

Current ratio = Current assets ÷ Current liabilities
Quick ratio = (Current assets – Inventory) ÷ Current liabilities
Cash ratio = Cash ÷ Current liabilities

FINANCIAL LEVERAGE RATIOS

Total debt ratio = Total debt ÷ Total assets = (Total assets – Total equity) ÷ Total assets
Debt-equity ratio = Total debt ÷ Total equity
Equity multiplier = Total assets ÷ Total equity = 1 + debt-equity ratio
Times interest earned = Earnings before interest and taxes ÷ Interest
Cash coverage = (Earnings before interest and taxes + depreciation + amortization) ÷ Interest

TURNOVER RATIOS
Inventory turnover = Cost of goods sold ÷ Inventory
Days sales in inventory = 365 ÷ Inventory turnover
Receivables turnover = Sales ÷ Receivables
Days’ sales in receivables= 365 ÷ Receivables turnover
Total asset turnover = Sales ÷ Total assets
Days in inventory = Days in period ÷ Inventory turnover

PROFITABILITY MEASURES
Profit margin = Net income ÷ Sales
Return on assets = Net income ÷ Total assets
Return on equity = Net income ÷ Total equity
EBITDA margin = EBITDA ÷ Sales

MARKET VALUE RATIOS

Price-to-earnings ratio = Market price per share ÷ Earnings per share
Market-to-book ratio = Market price per share ÷ Book value per share
Market capitalization = Market price per share x Shares Outstanding
Enterprise Value (EV) = Market capitalization + Market value of interest bearing debt – cash
EV Multiple = EV ÷ EBITDA
DUPONT IDENTITY

Net Income Sales

ROA = 
Sales Total assets
ROA = Profit margin x Total asset turnover
Net Income Sales Total assets
ROE =  
Sales Total assets Total equity

ROE = Profit margin x Total assets turnover X Equity multiplier

COMPOUNDING AND DISCOUNTING

FV = PV(1 + r)t FV
PV =
(1 + r)t
Effective annual rate FV of Ordinary Annuity
APR m (1 + r)t − 1
EAR = (1 + ) −1 FV = CF [ ]
m r
PV of Ordinary Annuity FV of Annuity Due
1 − (1 + r)−t (1 + r)t − 1
PV = CF [ ] FV = CF(1 + r) [ ]
r r
PV of Annuity Due PV of Ordinary Perpetuity
1 − (1 + r)−t CF
PV = CF(1 + r) [ ] PV =
r r
PV of Perpetuity Due General asset valuation
CF(1 + r) n
PV = CFt
r V= ∑
(1 + r)t
t=1

Value of Bond Value of Preference Share

1 − (1 + R B )−n Face Value Dp
𝑉𝐵 = Coupon [ ]+ 𝑃𝑃 =
RB (1 + R B )n RP

Value of Ordinary Share: Constant growth CF1 CFT

D0 (1 + g) D1 NPV = ( 1
+ ⋯+ )−I
(1 + r) (1 + r)T
𝑉𝐸 = =
RE − g RE − g