Formulas to Learn :

These formulas are not given on exam question paper . So guys you have to remember these
expressions to attempt an exam of F9.

1- ROCE = Profit before interest and tax / Capital employed

2- ROCE = Profit margin * Asset turnover

3- Gearing = Debt / Equity or Debt / Debt + Equity

4- Gearing = Prior Charge Capital / Equity capital (including reserves)

5- Interest coverage = PBIT / Interest

6- Current ratio = Current assets / Current liabilities

7- Quick ratio = Current assets - Inventory / Current liabilities

8- Earning per share (E.P.S) = Profits distributable to ordinary shareholders (Earnings) / No. of
ordinary shares issued

9- Price Earnings Ratio (P/E) = Market price per share / E.P.S

10- Dividend Yield = Dividend per share / Market price per share * 100

11- Accounts payable period = Payables / Purchases or Cost of sales * 365 days

12- Accounts receivables days = Receivables / Credit sales * 365 days

13- Inventory days = Inventory / Cost of sales * 365 days

14- Inventory days = Finished goods / cost of sales * 365 days

15- Work in progress days (W.I.P) = Average W.I.P / Cost of sales * 365

16- Raw material days = Average raw material inventory / Annual raw material purchases * 365
days

17- Equivalent annual cost (E.A.C ) = PV of cost over one replacement cycle / Annuity factor for
the number of years in the cycle

18- IRR = a + NPVa / NPVa - NPVb * (b - a)

19- Cost of equity = Ke = D1 / Po + g

20- Cost of debt = Kd = i (1 - T) / Po

21- Cost of preference shares = K pref = Preference dividend / Market Value = d / Po

22- Profitability index (P.I) = PV of cash flows (Without capital investment) / Capital investment

23- Conversion value = Po (1 + g )^n * R Where ,

Po = Current share price , g = Annual growth in share price , R = No. of shares , n = No. of
years

24- Ke = Dividend growth model = Do (1 + g) / Po + g

25- Asset turnover = Sales / Total assets

26- Earnings per share = E.P.S = Earnings (PAT) / No . of ordinary shares

27- Earnings = E.P.S * No. of ordinary shares

28- Dividend cover = E.P.S / D.P.S = Earnings per share / Dividend per share

29- Inverse of dividend cover = 1 / P/E * Div. Yield

30- Dividend per share = E.P.S / Dividend cover

31- Nominal discount rate = 1+i = (1 + r) (1 +h)

32- Operating gearing = Contribution / PBIT (Operating profit)

33- Financial gearing = Debt / Debt + Equity

34- Operating profit = Profit from operations / Sales revenue

35- Net profit = Net profit / Net sales or Profit before tax / Sales

36- Return on Equity (R.O.E) = Profit after tax (P.A.T) / Equity

37- Minimum (Buffer) inventory level = Re-order level - (Avg. usage * Ag. lead time)

38- Average inventory = Buffer or min. inventory level + Re-order quantity / 2

39- PBIT (Operating profit) = Interest cover * interest payable

40- Total shareholder return = (P1 - Po) + D1 / Po

41- Inventory = Inventory days * C.G.S / 365

42- Receivables = Receivable days * Credit sales / 365

43- Payables = Payable days * Credit purchases / 365

44- Annual discount cost = [{(d /100-d )^365/t}- 1] %

45- Overdraft = Total assets (C.A + N.C.A) - N.C.L (O. S.C+ R.E + Long term loan) - C. L
(Payables)
46- Assets = Liability + Capital

47- Total assets = Total liabilities + Capital (Equity + O.S.C + R.E)

48- Cash operating cycle = Inventory + Payables - Receivables

49- Net working capital = Current assets - Current liabilities

50- TERP = No. of old shares * old share price + No. of new shares * New share price / Total no.
of shares (old + new)

51- Value of rights = TERP - New share price

52- Net assets = Total assets (N.C.A+C.A) - Total liabilities (N.C.L+C.L) - Preference shares
53- Stock days = Raw material days + WIP days + Finished goods days
54- WIP days = WIP/COGS * 365
55- Finished goods days = Finished goods inventory/COGS *365