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24 Cards in this Set
- Front
- Back
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Residual income RI =
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= Reported net income -
( Desired rate of rerturn x Invested Capital) |
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return on sale OR NET Profit margin=
GROSS (profit) margin = |
=Net income / Sales revenue.
GROSS (profit) margin = (Sales - COGS) / Sales |
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capital turnover
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= Sales / Capital
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1.Cost of common stock - Ks?
2. Cost of preferred stock ? 3.Cost of retained earnings = |
Dividend / Net Proceeds + G,
G - is a growth rate Net Proceeds = Price x (1-flotation %) - other charges 2. Dividend 1 / Market price (1-flotation%) - underpricing 3.Dividend 1/ Market Price of the stock +G |
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Current Ratio
is indicatior of ____________ Selling Inventory on Account will _________ this ratio b/se ______________ The higher - ________ |
CA/CL
The ability to generate cash to meet short-term obligations Selling Inventory on Account will INCREASE this ratio b/se A/R > Inv => CA ↑ The higher - the better |
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Calculate payment discount 2/10 net 30
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360
--------------------------------------- x pay period -discount period Discount / 100 - Discount% |
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Safety stock =
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(max lead time - avg lead time) x usage,
Usage = annual demand / business days |
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Reoder Purchase point =
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= avg lead time x usage + safety stock
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Degree of total leverage =
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= % change in NI / % change in Sales
= DOL x DFL =Degree of Operating Leverage x Degree of Financial Leverage |
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Annual Percentage Rate - APR
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By law, credit card companies and loan issuers must show customers the APR
For example, a credit card company might charge 1% a month, but the APR is 1% x 12 months = 12%. APR= Effective periodic rate * # of periods |
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compound interest
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FV = Principal * (1+i)^n,
where n = number of periods i - PERIODIC RATE - annual rate/ n |
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DOL = ?
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% Δ in EBIT
------------------- % Δ in SALES High degree of operating leverage - firm's profits more sensitive to Δ in SALES Operating leverage involves using a large proportion of fixed costs to variable costs in the operations of the firm. The higher the degree of operating leverage, the more volatile the EBIT figure will be relative to a given change in sales, all other things remaining the same. |
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DFL=?
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% Δ in EPS (or % Δ in NI)
----------------------- % Δ in EBIT |
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Effective Interest Rate =
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=Interest / net proceeds,
net proceeds = principal - INTEREST- COMPENSATING BALANCE |
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To calculate factoring the receivables -
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1. annual cost = interest + fees to factor - savings
2. annual cost / usabe funds |
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Cost of factoring =
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(interest charged + monthly fees *12 - $$ saved)/ $$$ received
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Discount CF from Depreciation of an asset
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CF= cost of an asset x MACRS depr rate x tax rate x PV factor of 1
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the cost of the bond =
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interest / $$ received
After tax cost = interest / $$ received * ( 1-tax rate) Or [interest payment - tax savings ( interest X tax rate)] / $$ received |
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The effective annualized % cost of financing =
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{[(Face value + transaction costs)/ borrowed amount]- 1}x periods
(interest + transaction costs)/ usable funds * periods |
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What is the calculation for the interest payment on a bond?
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Stated rate of interest X Par value
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ROI is affected by
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Profit margin= NI/ Sales
and Capital Turnover rate = Sales/ Invested capital ROI = NI / AVG invested Capital |
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Reorder Purchase point =
SStock = |
=avg lead time x usage + safety stock (SS)
= (Max - Avg lead time) x usage |
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The Effective Annualized % cost of financing =
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((Face value + transaction cost) / amount borrowed) - 1) x periods
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A bank charges a rate of 1.5% per month on their credit card. What Effective Annual Rate (EAR) are they charging their customers.
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EAR is equal to (1+ APR/12) to the 12th power minus 1. (1+.18/12) to 12th power minus 1. 19.6% APR is the periodic rate (1.5) times the number of periods per year (12) or 18%
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