CMA Part 2 Equations
Liquidity Ratios
Current ratio
Quick ratio (Acid Test Ratio)
Cash ratio
Cash flow ratio
Net working capital ratio
Activity Ratios
Accounts receivables turnover
Days of sales in receivables
Measures of collectability
Inventory turnover
Days of sales in inventory
Accounts payable turnover
Days of purchases in payables
Operating cycle
Cash cycle
Assets turnover
Fixed assets turnover
Working capital turnover
Leverage
Financial leverage (Equity Multiplier)
Financial leverage index
Degree of Financial Leverage (DFL)
Degree of Operating Leverage (DOL)
Degree of Total Leverage (DTL)
Capital Structure and Solvency
Debt to equity ratio
Long-term debt to equity ratio
Debt to total assets ratio
Market Ratios
Book value per share
Price to book value
Price to earnings (P/E)
Price to EBITDA
Earnings yield
Dividends yield
Dividend pay-out
Basic EPS
Income Available for CS holders (IAC)
EPS effect of a convertible bonds
EPS effect of conv. preferred shares
= Current Assets / Current Liabilities
= (Cash + Cash equivalent + Marketable Securities + Net A/R) / CL
= (Cash + Cash equivalent + Marketable Securities) / CL
= Operating cash flow / Ending CL NWCR
= (CA CL) / Total Assets
= Annual net credit sales / Average gross A/R (A/R + bad debts provision)
= 365 / AR turnover (Average gross A/R / average daily net credit sales)
= Provision for doubtful accounts / gross accounts receivables Inventory:
= Annual COGS / Average inventory
= 365 / inventory turnover
= Annual credit purchases / average accounts payable
= 365 / AP turnover
= Days of sales in inventory + days of sales in receivables
= Operating cycle days of purchases in payables
= Net sales / Average total Assets
= Net sales / Average net fixed assets
= Sales / Net working capital
= Total Assets / Total Equity
= Return on common equity / Return on assets
= % in net income / % EBIT or EBIT / EBT
= % Operating income (EBIT) / % Sales or CM / EBIT
= % net income / % Sales or CM / EBT
= Total liabilities / Total equity
= Long-term liabilities (Total Debt CL) / Total Equity
= Total liabilities / Total assets
= (Total equity preferred equity) / # of common shares outstanding
= Market price per share / Book value per share
= Market price per share / BEPS (annual)
= Market price per share / EBITDA per share
= BEPS annual / Market price per share
= Dividend per share (annual) / Market price per share
= Annual common dividends / Income available for common stock
= IAC / WANCSO
= NI noncumulative PDs (declared) cumulative PDs (earned)
= Interest on the bond (1 t) / the # of shares the bonds are converted into
= Cumulative (noncumulative) PDs earned (declared) / # of P are converted into
Created by Fahid Silver
CMA Part 2 Equations
Earnings Coverage Ratios
Interest coverage ration
Fixed charges coverage ratio
Cash flow to fixed charges
Profitability Ratios
Gross profit margin percentage
Operating profit margin percentage
Net profit margin percentage
EBITDA margin percentage
Return on assets (ROA)
Return on assets
Return on assets
Return in equity (ROE)
Return on equity
Return on equity
Return on equity
Return on common equity
Sustainable Growth Rate
Risk and Return
Annual rate of return
Expected return
Standard deviation
Capital asset pricing model
Coefficient of Variation
Risk Premium
Market risk premium
Stock Valuation
Zero Growth Dividend Model
Constant Growth Model
Conversion Ratio
Cost of Capital Related Ratios
Weighted Average Cost of Capital
Cost of debt
Effective interest rate before tax
Cost of existing preferred stock
Cost of new preferred stock
Cost of retained earnings / equity
Cost of retained earnings / equity
Cost of retained earnings / equity
Cost of newly issued common stock
Cost of newly issued common stock
= EBIT / Interest expenses
= EBIT / FC
= Operating cash flow adjusted (operating cash flow + FC + Taxes) / Fixed charges
= Gross profit margin / Net sales
= Operating Income / Net sales
= Net income / Net sales
= EBITDA / net sales
= Net income / Average total assets
= Net profit margin Total asset turnover
= ROE (1 debt ratio)
= Net income / Average total equity
= ROA Financial leverage
= Net profit margin Total asset turnover Financial leverage
= ROA / (1 Debt ratio)
= (Net income Preferred dividends) / Average common equity
= ROE (1 Dividend Payout Ratio)
= Return / Average balance of amount invested
= (Rate of Return Probability)
= Variance2 Probability)
= Risk free Rate of return + Beta (Market rate of return )
= Standard deviation / Expected rate of return
= Beta (Market rate of return Risk free rate of return)
= Market rate of return Risk free rate of return
= Annual dividend / Required rate of return
= Dividends next year / (Required rate of return growth rate in dividends)
= Par Value of Convertible Bond / Conversion Price of Equity
= Total costs of financing / Total amount of financing
= Cost of debt before tax (1 - tax)
= Interest expense / Cash received from selling the bond First year only
= Dividends / Market value of preferred stock
= Dividends / Net proceeds of issue (selling price issuance cost)
= (Dividends next year / Market price) + Growth rate in dividends
= Dividends / Market price When No Growth is Expected in Dividends
= + Beta (Market rate of return ) When No Dividends is paid
= (Dividends next year / Net proceeds of the issue) + Growth rate in dividends
= Dividends / Net proceeds of the issue When No Growth is Expected in Dividends
Created by Fahid Silver
CMA Part 2 Equations
Managing Current Assets Related Ratios
Cost of not taking the cash discount
Optimal level of MS to convert to cash
Reorder Point
Average Inventory
Cost (after solving MCQ u will get it)
Economic order quantity
EIR on loans with compensating balances = Annualized interest paid on full amount borrowed
Effective Interest Rate
Effective Rate of Discounted Interest
Cash deposited in the sellers account
In case the company sold
its RECEIVABLES
Trade balance =
Discount or Premium in Forward Market =
360 Discount
=
Total period of paymentperiod of discount payment 100%Discount
2 Fixed cost per transaction Total cash deman for the period
=
Interest rate for marketable securities
= (Average daily usage Average lead time in days) + Safety stock
= (Number of units ordered each time / 2) + Safety stock
= Interest earned (Amount transferred interest earned per day # of days)
2 Varaible cost of placing an order Deman in units for the period
=
Carrying cost of one unit
Interest earned on cash deposited to meet compensating balance requirement
(Amount of the Loan
Additional amount deposited to meet the compensating balance requirement)
Interest on the principal amount of the loan
=
Principal amountinterest withheld
= Face value of the accounts receivable
Factoring fee (a percentage of the face value of the receivables)
Factors holdback for merchandise returns
= Funds deposited to the sellers account with the factor
Interest expense
= Total net export total net import
Forward ratesport rate Days in year
spot rate Days in forward period
Created by Fahid Silver
CMA Part 2 Equations
Cost-Volume-Profit (CVP) Ratios
Breakeven point in Units
Breakeven point in Revenue
Target Sales Volume in Units
Target Sales Revenues
Margin of safety ratio
Margin of safety
Target Sales in units as a % of sales
Target net income (in units)
Target net income (in dollars)
WACM per unit
Breakeven number of total units (Mix)
WACMR per unit
Breakeven revenue in total (Mix units)
BEP per basket
CM per basket
Selling price per basket
CM ratio per basket
Profit
Profit
Maximum price to pay for a product
Pricing Equations
Elasticity of demand
Target cost per unit
Markup on cost
Markup on selling price
Markup %
Markup level
Investment Decisions Ratios
Nominal Rate of Return
Real Rate of Return
Real Expected Cash Flow
Payback period (# of years)
Payback reciprocal
Accounting rate of return
Net initial investment
Tax basis
Internal rate of return
Profitability index
Risk-Adjusted Discount Rate
= Total Fixed Costs/Unit Contribution Margin
= Total Fixed Costs/Contribution Margin Ratio
= (TFC + Target operating income) / Contribution margin per Unit
= (TFC + Target operating income (Pre-Tax Income)) / Contribution Margin Ratio
= (Margin of safety) / (Planned sales)
= Planned (budgeted) sales Breakeven sales
= Total Fixed Cost / (UCM (Percentage required in the question X selling price))
= (Total fixed cost + (Target net income / 1 tax) / Unit CM
= (Total fixed cost + (Target net income / 1 tax) / CM Ratio
= (CM per unit Q%) + (CM per unit Q%)
= Total fixed costs / WACM
= (CMR (# of units sold from A / total # of units sold from A & B)) + (CMR Q%)
= Total fixed costs / WACMR
= fixed costs / CM per basket
= (CM per unit of A # of units sold of A) + (CM per unit of B # of units sold of B)
= (SP of A # of units sold from A) + (SP of B # of units sold from B)
= CM per basket / Selling price per basket
= (Sales price Units sold) (Variable cost per unit units sold) Fixed costs
= (CM Units sold) Fixed costs
= Total internal production costs Unavoidable Costs (fixed and variable)
= (Q2 Q1) / [(Q2 + Q1)/2] / (P2 P1) / [(P2 + P1)/2]
= Target price Target operating income
= Item cost (1 + Markup %)
= Item cost / (1 Markup %)
= Target return / Total cost
= Operating income per unit / Full cost
= (1 + Real Rate of Return) (1 + Inflation Rate) 1
= (1 + Nominal Rate) / (1 + Inflation Rate) 1
= Nominal Cash Flow / (1 + Inflation Rate)
= initial investment / annual constant after tax cash flows
= 1 / Payback time
= Annual average after tax accounting net income / Net initial investment (Av. NI)
= Initial investment (cost of new assets + Capitalized expenditures)
+ Initial in working capital investment (not applicable for tax)
Cash Received from the disposal of the old equipment
(If gain occurred should be deducted from the proceeds received)
(If loss occurred should be add to the proceeds received)
= Full cost Accumulated depreciation
= Net initial investment / Only annually constant after cash flows (PV of Annuity)
= PV of future cash flows or NPV / Net investment
= Weighted Average Cost of Capital + Risk Premium
Created by Fahid Silver