FIN10670: Formula Sheet for Final Exam

Lecturer: Dr. Tiffany Thng

• Present value of a future cash flow

 
FV C
PV = ≡ (1)
(1 + r)t (1 + r)t

• Discounted multiple cash flows

T  
X F Vt C1 C2 CT
PV = ≡ + + ... + (2)
t=1
(1 + r)t (1 + r)1 (1 + r)2 (1 + r)T

• Present value of a perpetuity and growing perpetuity

C C
PV = , (3)
r r−g
• Present value of an annuity
1
" #!
1−
 
1 1 (1+r)t
PV = C − ≡c (4)
r r(1 + r)t r

• Present value of a growing annuity

"
t #
1 − 1+g
PV = C 1+r
(5)
r−g

• Continuous Compounding
F VT = C0 ∗ erT (6)
• Equivalent Annual Rate  r m
EAR = 1 + −1 (7)
m
• Percentage Return on an Investment
Capital Gains + Income
P ercentage Return = ∗ 100 (8)
Initial P rice P aid
• Net Present Value/Internal Rate of Return/Yield to Maturity
C1 C2 Ct
N P V = C0 + + 2
+ ... + (9)
1 + r (1 + r) (1 + r)t
IRR or YTM = r when NPV = 0
• Capital Asset Pricing Model (CAPM)
E(Ri ) = rf + β[E(Rm ) − rf ] (10)
Ratios

Liquidity Ratios
Current Assets
Current Ratio = Current Liabilities

Quick Ratio = Current Assets−Inventory

Current Liabilities

Cash Ratio = CashCurrent

and Cash Equivalents
Liabilities

Financial Leverage Ratios

T otal Assets−T otal Equity
T otal Debt Ratio = T otal Assets
T otal Debt
Debt − Equity Ratio = T otal Equity
T otal Assets
Equity M ultiplier = T otal Equity
EBIT
T imes Interest Earned Ratio = Interest
EBIT +Depreciation
Cash Coverage Ratio = Interest

Turnover Ratios
Cost of Goods Sold
Inventory T urnover = Inventory
365 Days
Days Sales in Inventory = Inventory T urnover
Sales
Receivables T urnover = T rade Receivables
365 Days
Days Sales in Receivables = Receivables T urnover
Sales
T otal Asset T urnover = T otal Assets

Profitability Ratios
N et Income
P rof it M argin = Sales
N et Income
Return on Assets = T otal Assets
Return on Equity = TNotal
et Income
Equity

Market Value Ratios

N et Income
Earnings per Share = Shares Outstanding
P rice per Share
P rice − Earnings Ratio = Earnings per Share
M arket value per Share
M arket − to − Book Ratio = Book value per Share