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2 ‫كل المعادالت الموجودة في بارت‬

Unit 3
𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
• Rate of return= 𝐴𝑚𝑜𝑢𝑛𝑡 𝑖𝑛𝑣𝑒𝑠𝑡𝑒𝑑

𝑃𝑎𝑟 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑐𝑜𝑛𝑣𝑒𝑟𝑡𝑖𝑏𝑙𝑒 𝑏𝑜𝑛𝑑

• Conversion price = 𝐶𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑝𝑟𝑖𝑐𝑒

Unit 4
Per share ratios
1-To get value of the stock
A. With dividend growth rate
I. In case of constant growth rate
Expected dividend per share
=
Discount rate(cost of capital)−Dividends growth rate

Expected dividend per share = Last annual dividend paid * ( 1+growth rate )
II. In case of variable growth rate
Has 3 steps
1. calculate and sum the present value of dividends in the period of high
growth

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing

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2. calculate the present value of the stock based on the period of steady
growth discounting the value back to year 1.
3. Sum the totals calculated in step 1 and step 2.
B. With fixed dividend rate
= Dividend per share / cost of capital
2- Price / EBITDA ratio
= Market price per share / EBITDA
3-Book value per share
= Total stockholders equity – preferred equity / Number of common shares outstanding
4- Price – Earning ratio ( P/E)
= Market price / EPS EPS= Net income / No of shares

5- Market to book ratio or price-book ratio

= Market price per share / Book value per share
6- Price- Sales ratio
= Market price per share / Sales per share
7- EPS
= Net income available to common shareholders / Weighted
average common shares outstanding
Other market based measures
8- Earnings Yield ( Reciprocal of P/ E ratio )
= Earning per share / Market price per share
9- Dividends payout ratio

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing

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= Dividends to common shareholders / income available to common shareholders
10- Dividends yield
= Dividend per share / Market price per share
11- Shareholder return
Ending stock price – Beginning stock price + Annual dividends per share
=
𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝑠𝑡𝑜𝑐𝑘 𝑝𝑟𝑖𝑐𝑒

12- the amount of gain or loss on a call or a put option can be calculated as
follows
• Call option equations
Buyer/holder (long position) gain / loss=
Units of underlying × (Excess of market price over exercise price – Option price)
Seller/writer (short position) gain / loss=
Units of underlying × (Option price – Excess of market price over exercise price)
Intrinsic value of a call option=
Underlying price – Exercise price (cannot be less than zero)
• Put option equations
Buyer/holder (long position) gain / loss=
Units of underlying × (Excess of exercise price over market price – Option price)
Seller/writer (short position) gain / loss=
Units of underlying × (Option price – Excess of exercise price over market price)
Intrinsic value of a put option=
Exercise price – Underlying price (cannot be less than zero)

Cost of capital ratios

13-Cost of debt

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing

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=Effective rate*(1-marginal tax rate )
14- Cost of preferred stock
= Cash dividend on preferred stock / Market price of preferred stock
15- Cost of common stock
= Cash dividend on common stock / Market price of common stock
16- the formula to calculate the after tax WACC where is no preferred stock
𝐸 𝐷
WACC = (( *𝑅𝑒 )+(( *𝑅𝑑 )*(1-T)))
𝑉 𝑉

𝑅𝑒 =Cost of equity
𝑅𝑑 = Cost of debt
E= Market value of the firm`s equity
D = Market value of the firm`s debt
V = E+D
T = Corporate tax rate

Cost of new capital

17- Cost of new debt
= Annual interest / Net issue proceeds
18- Cost of new preferred stock
= Next dividend / Net issue proceeds
19- Cost of new common stock
= (Next dividend / Net issue proceeds )+ Dividend growth rate

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing

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Unit 5
1- EOQ Model applied to cash management
2𝑏𝑇
Q=√ 𝑖

Q= optimal cash balance

B= fixed cost per transaction
T= Total demand for cash
I= interest rate on marketable securities
2-Annual benefit of speeding up cash collections
= (Daily cash recipts*Days of reduced float )*Opportunity cost of funds
3-Expected rate of return (Ȓ)
= ∑ ( possible rate of return * probability )
4- Covariance of a two stock portfolio
= Correlation coefficient *Standard deviatio𝑛1 *Standard deviatio𝑛2
5 – CAPM formula
Required rate of return = 𝑅𝐹 +β(𝑅𝑀 -𝑅𝐹 )
𝑅𝐹 = Risk free return
𝑅𝑀 = Market return
Β = Measure of the systematic risk or volatility of the individual security in
comparison to the market.
6- The increased investment in receivables is calculated as follows

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing

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𝐼𝑛𝑐𝑟𝑒𝑚𝑒𝑛𝑡𝑎𝑙 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑐𝑜𝑙𝑙𝑒𝑐𝑡𝑖𝑜𝑛 𝑝𝑒𝑟𝑖𝑜𝑑
= Incremental variable costs * 𝐷𝑎𝑦𝑠 𝑖𝑛 𝑦𝑒𝑎𝑟

7- Cost of change
= Increased investment in receivables * Opportunity cost of funds
8- The benefit or loss resulting from changing credit terms
= Incremental contribution margin – Cost of change
9- Average accounts receivable
𝐵𝑒𝑔 𝐴𝑅+𝐸𝑁𝐷 𝐴𝑅
= 2

= Daily credit sales * Average collection period

= Net credit sales * ( Average collection period / Days in year )
= Net credit sales / AR turnover
10- Cost of safety stock
= Cost of safety stock + expected stock out costs
11- The reorder point
= ( Average demand * Leadtime ) + Safety stock
12- Cost of carrying safety stock
= Expected stock out costs + Carrying costs
13- Economic order quantity

2𝑎𝐷
=√ 𝐾

A =Fixed cost per purchase order

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing

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D = Periodic demand in units
K = Carrying cost per unit

Unit 6
1- Forward premium or discount
𝐹𝑜𝑟𝑤𝑎𝑟𝑑 𝑟𝑎𝑡𝑒−𝑆𝑝𝑜𝑡 𝑟𝑎𝑡𝑒 𝐷𝑎𝑦𝑠 𝑖𝑛 𝑦𝑒𝑎𝑟
= *
𝑆𝑝𝑜𝑡 𝑟𝑎𝑡𝑒 𝐷𝑎𝑦𝑠 𝑖𝑛 𝑓𝑜𝑟𝑤𝑎𝑟𝑑 𝑝𝑒𝑟𝑖𝑜𝑑
2- Cross rate
𝐷𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝑐𝑢𝑟𝑟𝑒𝑛𝑐𝑦 𝑝𝑒𝑟 𝑈𝑆 𝐷𝑜𝑙𝑙𝑎𝑟
= 𝐹𝑜𝑟𝑖𝑒𝑔𝑛 𝑐𝑢𝑟𝑟𝑒𝑛𝑐𝑦 𝑝𝑒𝑟 𝑈𝑆 𝐷𝑜𝑙𝑙𝑎𝑟

3- Effective rate
𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑐𝑒
= 𝐴𝑚𝑜𝑢𝑛𝑡 𝑏𝑜𝑟𝑟𝑜𝑤𝑒𝑑

Unit 7
• Liquidity Ratios

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
1- Current ratio =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

𝐶𝑎𝑠ℎ+𝑀𝑎𝑟𝑘𝑒𝑡𝑎𝑏𝑙𝑒 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑖𝑒𝑠+𝑁𝑒𝑡 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠

2- Quick Ratio ( Acid Ratio ) =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝐶𝑎𝑠ℎ+𝑀𝑎𝑟𝑘𝑒𝑡𝑎𝑏𝑙𝑒 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑖𝑒𝑠
3-Cash Ratio =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

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𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤 𝐹𝑟𝑜𝑚 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑠

4- Cash Flow Ratio =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑙𝑖𝑡𝑖𝑒𝑠

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠−𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

5- Net Working Capital Ratio =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠

• Profitability Ratios
Income Statement percentages
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠−𝐶𝑂𝐺𝑆
1- Gross Profit Margin Ratio =
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠

𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑖𝑛𝑐𝑜𝑚𝑒
2- Operating profit margin ratio =
𝑁𝑒𝑡 𝑠𝑙𝑎𝑙𝑒𝑠

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
3- Net profit margin ratio =
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠

𝐸𝐵𝐼𝑇𝐷𝐴
4- EBITDA Margin Ratio =
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠

Balance Sheet Percentages

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing

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𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
1- Return on assets ratio (ROA )= 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
2- Return on equity =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦

3- The relationship between ROA and ROE can be seen by the

following formula :
ROA=ROE*(1-Debt ratio)

4- Sustainable growth rate = ROE*(1-Dividend payout ratio)

5-Dupont Model for ROA

𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
= *
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝑆𝑎𝑙𝑒𝑠

Note: ROA = Net profit margin * Total Assets Turnover

𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
Because Net profit margin =
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
And Total Assets Turnover =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝑆𝑎𝑙𝑒𝑠

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing

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6- Dupont Model for ROE

𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
= * *
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝑆𝑎𝑙𝑒𝑠 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦

So ROE= Net profit margin * Total Assets Turnover*Equity Multiplier

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
Because Equity Multiplier =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦

VIP Note ROI = capital turnover (sales ÷ investment) times the profit
margin (income ÷ sales)
Capital Structures Ratios

1-Total debt to total capital ratio (Debt to Total Assets Ratio )

𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡
=
𝑇𝑜𝑡𝑎𝑙 𝐶𝑎𝑝𝑖𝑡𝑎𝑙

𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡
2-Debt to Equity Ratio =
𝑇𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦

𝐿𝑜𝑛𝑔 𝑇𝑒𝑟𝑚 𝐷𝑒𝑏𝑡

3- Long Term Debt to Equity Ratio =
𝑇𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing

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Earning Coverage Ratios

𝐸𝐵𝐼𝑇
1-Times Interest Earned Ratio=
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒

2-Earnings to fixed charges Ratio =

𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑏𝑒𝑓𝑜𝑟𝑒 𝑓𝑖𝑥𝑒𝑑 𝑐ℎ𝑎𝑟𝑔𝑒𝑠 𝑎𝑛𝑑 𝑇𝑎𝑥𝑒𝑠
𝐹𝑖𝑥𝑒𝑑 𝑐ℎ𝑎𝑟𝑔𝑒𝑠

3- Cash Flow to fixed charges ratio

𝐶𝑎𝑠ℎ 𝑓𝑟𝑜𝑚 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑠+𝐹𝑖𝑥𝑒𝑑 𝑐ℎ𝑎𝑟𝑔𝑒𝑠+𝑇𝑎𝑥 𝑝𝑎𝑦𝑚𝑒𝑛𝑡𝑠
=
𝐹𝑖𝑥𝑒𝑑 𝑐ℎ𝑎𝑟𝑔𝑒𝑠

*Leverage Ratios

𝑃𝑟𝑒−𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 𝑎𝑚𝑜𝑢𝑛𝑡

1-Degree of Leverage=𝑃𝑜𝑠𝑡−𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 𝑎𝑚𝑜𝑢𝑛𝑡

2-Degree of operating leverage ( DOL ) Single period version

𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛
= 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑖𝑛𝑐𝑜𝑚𝑒 𝑜𝑟 𝐸𝐵𝐼𝑇

3- Degree of operating leverage ( DOL ) Percentage change version

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing

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%∆ 𝑖𝑛 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑖𝑛𝑐𝑜𝑚𝑒 𝑜𝑟 𝐸𝐵𝐼𝑇
= %∆ 𝑖𝑛 𝑠𝑎𝑙𝑒𝑠

4- Degree of Financial leverage ( DOL ) Single period version

𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑏𝑒𝑓𝑜𝑟𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑡𝑎𝑥𝑒𝑠 𝐸𝐵𝐼𝑇
= 𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑏𝑒𝑓𝑜𝑟𝑒 𝑡𝑎𝑥𝑒𝑠 𝐸𝐵𝑇

5- Degree of Financial leverage ( DOL ) Percentage change version

%∆ 𝑖𝑛 𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
= %∆ 𝑖𝑛 𝐸𝐵𝐼𝑇

Unit 8
𝑁𝑒𝑡 𝑐𝑟𝑒𝑑𝑖𝑡 𝑠𝑎𝑙𝑒𝑠
1-Account receivable turnover=
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒

2-Days` sales outstanding in receivables

𝐷𝑎𝑦𝑠 𝑖𝑛 𝑦𝑒𝑎𝑟
=
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒

𝐶𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑

3-Inventory turnover=
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing

 ‫نسألكم الدعاء بالتوفيق‬
𝐷𝑎𝑦𝑠 𝑖𝑛 𝑦𝑒𝑎𝑟
4-Days`sales in inventory=
𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟

𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠
5-Accounts payable turnover=
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑝𝑎𝑦𝑎𝑏𝑙𝑒

6-Days`purchases in accounts payable

𝐷𝑎𝑦𝑠 𝑖𝑛 𝑦𝑒𝑎𝑟
=
𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑝𝑎𝑦𝑎𝑏𝑙𝑒 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟

7-Operating cycle
=Days` sales outstanding in receivables +Days` sales in inventory
8-Cash cycle
=Operating cycle - Days` purchases in accounts payable

𝑆𝑎𝑙𝑒𝑠
8-Working capital turnover =
𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝑐𝑎𝑝𝑖𝑡𝑎𝑙
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
9-Fixed assets turnover=
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑛𝑒𝑡 𝑝𝑟𝑜𝑝𝑒𝑟𝑡𝑦,𝑝𝑙𝑎𝑛𝑛𝑡,𝑎𝑛𝑑 𝑒𝑞𝑢𝑖𝑝𝑚𝑒𝑛𝑡

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing

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10- Usable funds=Invoice amount*(1-Discount%)

11-Annualized cost of not taking a discount

𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡% 𝐷𝑎𝑦𝑠 𝑖𝑛 𝑦𝑒𝑎𝑟
= *
100%−𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡% 𝑇𝑜𝑡𝑎𝑙 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 𝑝𝑒𝑟𝑖𝑜𝑑−𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑝𝑒𝑟𝑖𝑜𝑑

𝑁𝑒𝑡 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒

12- Effective interest rate =
𝑈𝑠𝑎𝑏𝑙𝑒 𝑓𝑢𝑛𝑑

13-Effective rate on discounting loan without reference to dollar amount

𝑆𝑡𝑎𝑡𝑒𝑑 𝑟𝑎𝑡𝑒
=
1−𝑆𝑡𝑎𝑡𝑒𝑑 𝑟𝑎𝑡𝑒

14- Interest expense= Loan amount * Stated rate

𝑈𝑠𝑎𝑏𝑙𝑒 𝑓𝑢𝑛𝑑𝑠
15- Loan amount =
1−𝑠𝑡𝑎𝑡𝑒𝑑 𝑟𝑎𝑡𝑒

𝑈𝑠𝑎𝑏𝑙𝑒 𝑓𝑢𝑛𝑑𝑠
16- Loan amount =
1−𝐶𝑜𝑚𝑝𝑒𝑛𝑠𝑎𝑡𝑖𝑛𝑔 𝑏𝑎𝑙𝑎𝑛𝑐𝑒%

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing

 ‫نسألكم الدعاء بالتوفيق‬

17- Effective rate with compensating balance

𝑆𝑡𝑎𝑡𝑒𝑑 𝑟𝑎𝑡𝑒
=
1−𝐶𝑜𝑚𝑝𝑒𝑛𝑠𝑎𝑡𝑖𝑛𝑔 𝑏𝑎𝑙𝑎𝑛𝑐𝑒

18- If the loan is offered on a discounted basis with a

compensating balance requirement the formula for the effective
𝑆𝑡𝑎𝑡𝑒𝑑 𝑟𝑎𝑡𝑒
rate is =
1−𝑆𝑡𝑎𝑡𝑒𝑑 𝑟𝑎𝑡𝑒− 𝐶𝑜𝑚𝑝𝑒𝑛𝑠𝑎𝑡𝑖𝑛𝑔 𝑏𝑎𝑙𝑎𝑛𝑐𝑒

19- The annualized rate of commercial paper

Annualized rate = 𝐹𝑎𝑐𝑒 𝑣𝑎𝑙𝑢𝑒−𝑁𝑒𝑡 𝑝𝑟𝑜𝑐𝑒𝑒𝑑𝑠
𝑁𝑒𝑡 𝑝𝑟𝑜𝑐𝑒𝑒𝑑𝑠
∗ 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑡𝑒𝑟𝑚𝑠 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟

Unit 9

• Net initial investment =

Cost of new equipment
+ Initial working capital requirements
+ After tax proceeds from disposal of old equipment

• Annual net cash flow =

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing

 ‫نسألكم الدعاء بالتوفيق‬
After tax cash collections from operations ( excluding depreciation effect.
+Tax saving from depreciation deductions ( depreciation tax shield ).

• Project termination cash flows

After tax proceeds from disposal of new equipment
+ Recovery of working capital ( untaxed)

IIR % = initial investment / annual return

NPV factor = Loan amount or initial investment / Annual return QS 47 9.3

𝑃𝑉 𝑜𝑓 𝑓𝑢𝑡𝑢𝑟𝑒 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤𝑠

• Profitability index = 𝑁𝑒𝑡 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡

Unit 10
• Profit maximization = Marginal revenue = Marginal cost

• UCM = unit sales price – unit variable cost

𝑇𝑜𝑡𝑎𝑙 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡

• Breakeven point in units = 𝑈𝐶𝑀

𝑈𝐶𝑀
• CM ratio or CMR = 𝑢𝑛𝑖𝑡 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒

𝑇𝑜𝑡𝑎𝑙 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠

• Breakeven point in dollars = 𝐶𝑀𝑅

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing

 ‫نسألكم الدعاء بالتوفيق‬

• Margin of safety =Planned sales – Breakeven sales

𝑀𝑎𝑟𝑔𝑖𝑛 𝑜𝑓 𝑠𝑎𝑓𝑒𝑡𝑦
• Margin of safety ratio = 𝑃𝑙𝑎𝑛𝑛𝑒𝑑 𝑠𝑎𝑙𝑒𝑠

𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡+𝑇𝑎𝑟𝑔𝑒𝑡 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑖𝑛𝑐𝑜𝑚𝑒

• Target income in units = 𝑈𝐶𝑀

• Target income in units ( net income known)=

𝑇𝑎𝑟𝑔𝑒𝑡 𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒

𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡 + ( 1 − 𝑡𝑎𝑥 𝑟𝑎𝑡𝑒 )
𝑈𝐶𝑀

• Operating income = Sales – variable costs – fixed costs

• Multi product breakeven point=

𝑇𝑜𝑡𝑎𝑙 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠

𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 − 𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡
Or

𝑇𝑜𝑡𝑎𝑙 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠

𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑈𝐶𝑀

Because weighted average UCM =

𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 − 𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing

 ‫نسألكم الدعاء بالتوفيق‬

𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑈𝐶𝑀

• Weighted average contribution margin ratio=𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒

𝑇𝑜𝑡𝑎𝑙 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠

• Multi product breakeven point in dollars=
𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑀𝑅

• Price Elacticity of demand

∣𝑄1−𝑄2∣
%∆𝑄 ∣𝑄1+𝑄2∣
𝐸𝑑 = =
%∆𝑃 ∣𝑃1−𝑃2∣/∣𝑃1+𝑃2∣

• Four common cost plus pricing formulas

1-Price=total cost+(total cost*markup percentage)
2- Price=Absorption mfg.cost+( Absorption mfg.cost *markup percentage)
3- Price=Variable mfg.cost+( Variable mfg.cost *markup percentage)
4- Price=Total Variable cost+( Total Variable cost *markup percentage)

prepared by / Mohamed Samir CMA part 1 passed (410 ) , part 2 ongoing