25th Aug 2014 Lect

Current
time
invest
Req rate of return
Discount Rate
opportunity cost (here not and other)
Req rate of return Two Types
(Real & Nomiral Risk free Rate) req to an investor.
Real risk free rate means a min ret
Nominal Risk free rate of ret means as same as real risk free rate of ret with adjust
Inflation.
Real--------inflation----------Norminal
Nominal Risk free Rate+Default Risk Prem+liquidity risk Prem+Maturity Risk Prem
(us treasury bond without risk)
Annual Ret (Nominal Ret)
Effective Annual Ret (Yield Ret)--- The income return on an investment. This refers to the
interest or dividends received from a security and is usually expressed annually as a
percentage based on the investment's cost, its current market value or its face value.

Liquidity Ratio (Pure B/S Ratio)

Current Ratio=CA/CL (Show Short term liability)
Quick Ratio= CA-Inventory/CL
Cash Ratio/Acid Test Ratio= Cash& M.S/CL
Defensive Internal Ratio= Cash+MS+Reciable/Aveg Daily Exp

Activity Ratio (Mixed Ratio)
Rec.Turnover Ratio = Sales/ Aveg Rec. (ACP or No. Of days o/s sales=
365/RTR) and (ITR = Cost of Good Sold/Avg Inventory) and No.of days o/s
Inventory = 365/ITR and Payable Turnover Ratio = Purchase/ Avg Payable
Working Capital Turnover Ratio




Profitibility Ratio:
ROE = Net Income/Avg total equity (ROTE)
ROE= Net income-Pref Dividened/Avg total common equity (ROCE)
ROCE= NI+(1+Tax) or EBIT(1-t)/Avg Total Capital
ROIC= EBIT/Avg Total Capital
Solvency Ratio:
Debt to Equity= total debt/total equity
Debt to Capital= Debt/E+D
Interest Covrege Ratio= EBIT/Int
Fixed Chargeable Ratio=(Lease account)= EBIT+Fixed Chargeable/Fixed Chg + Int
Financial Leverege= Avg Total Asset/Avg Total Equity

Du point Analysis
ROE
LIBOR
Cash Flow Statement (nature Base)
Less: Inc in CA
Add: Dec in CA
Add: Inc in CL
Less: Dec in CL


CAPM
FCF
Dis.Rate

Future Cash Flow
CFAT-Cash Flow From after tax
Sung Cost
Canelization
Increadivable cash
IRR(Expect Ret)= NPV is Zero