Formulas

3/12/13
Printable Flash Cards
Term 1
Definition 1
Future Value of a Single Cash Flow
FVn = PV * (1+r)N
Term 2
Definition 2
Present Value of a Perpetuity
PV(perpetuity) = PMT / (I/Y)
Term 3
Definition 3
Future Value with continuous compounding
FVn = PV * (ers *N)
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Term 4
Definition 4
Effective Annual Rates
EAR = (1+Periodic interest rate)N - 1
Term 5
Definition 5
Net Present Value
NPV = [CFt / [(1+r)t]
Term 6
Definition 6
Bank Discount Yield
rBD = [D/F] * [360/t] rBD = annualized yield on a bank discount basis D = dollar discount (face value purchase price) F = face value of the bill t = number of days until maturity
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Term 7
Definition 7
Holding Period Yield
[[(P1+D1)] / P0] - 1
Term 8
Definition 8
Effective Annual Yield
EAY = [(1+HPY)365/t] - 1 HPY = holding period yield t = number of days until maturity
Term 9
Definition 9
Rmm = [360*rBD] / [360-(t*rBD)] Money Market Yield Rmm = HPY*(360/t)
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Term 10
Definition 10
Population Mean
= xi / N
Term 11
Definition 11
Sample Mean
X = xi / n
Term 12
Definition 12
Geometric Mean
Rg = [[(1+r1) * (1+r2) ... (1+rt)](1/t)] - 1
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Term 13
Definition 13
X = Number of observations / (1/xi) Harmonic Mean* *Find what this measures/when it's used
Term 14
Definition 14
Internal Rate of Return
Discount rate that equates the cash flows with the initial cash outlay [CFt / (1 + IRR)t] = Outlay
Term 15
Definition 15
Percentiles
Ly = [(n+1)*y] / 100 y = percentage point at which we are dividing the distribution Ly = location (L) of the percentile (Py) in the data set sorted in ascending order
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Term 16
Definition 16
Range
Range = Maximum value - Minimum value
Term 17
Definition 17
MAD = |xi-X| / n Mean Absolute Deviation n = number of items in the data set X = mean | | = absolute value
Term 18
Definition 18
2 = (xi-)2 / N Population Variance
Variances = observation population mean
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Term 19
Definition 19
Sample Variance
s2 = (xi-X)2 / (n-1)
Term 20
Definition 20
s/X Coefficient of Variation Sample standard deviation / sample mean
Term 21
Definition 21
[rp-rf] / sp Sharpe Ratio (mean portfolio return - risk free return) / standard deviation of portfolio returns
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Term 22
Definition 22
[ [ [n*(n+1)] / [(n-1)(n-2)(n-3)] ] * [((xiX)4 / s4] ] - [ [3(n-1)2] / [(n-2)(n-3)] ] Sample Kurtosis As n becomes large, the first term becomes 1/n and the third term becomes 3
Term 23
Definition 23
P(AB) = P(A|B) * P(B) Multiplication Rule for Probability Probability of A and B is the probability of A given B times the probability of B
Term 24
Definition 24
Addition rule for Probabilities
P(A or B) = P(A) + P(B) - P(AB)
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Term 25
Definition 25
P(A) = P(AS) + P(ASc) The Total Probability Rule* *Don't know what this is at all
Term 26
Definition 26
Expected Value
E(X) = P(xi)*xi xi = one of n possible outcomes
Term 27
Definition 27
Covariance (expected value)
Cov (XY) = E{[X - E(X)][Y - E(Y)]} Cov (RA,RB) = E{[RA - E(RA)][RB E(RB)]}
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Term 28
Definition 28
Expected Return on a Portfolio
Sum of weight * expected return
Term 29
Definition 29
Portfolio Variance
Var(Rp) = Sum of (w i'*w j*Cov(Ri,Rj))
Term 30
Definition 30
Bayes' Formula
P(Event|Information) = [P(Information|Event) * P(Event)] / P(Information)
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Term 31
Definition 31
nC r
= (n over r) = n! / [(n-r)!*(r!)]
Combinations
Used when the order in which the items assigned the labels is not important
Term 32
Definition 32
Permutations
nP r
= (n!) / (n-r)!
Term 33
Definition 33
P(X=x) = nCx *(p)x *(1-p)n-x p = probability of success 1-p = probability of failure nCx = number of possible combinations of having x successes in n trials. Aka number of ways to choose x from n when the order does not matter
Binomial distribution
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Term 34
Definition 34
z-Score
z = (xi-) /
Term 35
Definition 35
Sampling Error
Sampling error of the mean = Sample mean - Population mean =X-
Term 36
Definition 36
Standard error (when population variance is known)
SE = / (n1/2)
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Term 37
Definition 37
Confidence intervals (amounts)
90% - x 1.65s 95% - x 1.96s 99% - x 2.58s Mean ...
Term 38
Definition 38
Standard error when population variance is not known
SE = s / (n1/2)
Term 39
Definition 39
Sample mean (reliability factor * standord error) Confidence intervals (computation) Reliability factor = The standard normal random variable for which the probability of an observation lying in either tail is / 2
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Term 40
Definition 40
Test Statistic
(Sample statistic-hypothesized value) / standard error of sample statistic
Term 41
Definition 41
Power of a test
1 - P(Type II Error)
Term 42
Definition 42
[(X-0)] / [(s / n1/2)] t-Statistic X = sample mean 0 = hypothesized population mean s = standard deviation of the sample n = sample size
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Term 43
Definition 43
Own-Price Elasticity of Demand
% Change in Demand / % Change in price
Term 44
Definition 44
Income Elasticity of Demand
% Change in quantity demanded / % change in income
Term 45
Definition 45
Cross-Price Elasticity of Demand
% Change in demand / % Change in price of substitute or complement
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Term 46
Definition 46
Accounting Profit (Loss)
Total Revenue - Total Accounting Costs
Term 47
Definition 47
Total Revenue
Price times quantity or the sum of individual units sold times their respective prices
Term 48
Definition 48
Average Revenue
Total Revenue divided by quantity
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Term 49
Definition 49
Marginal Revenue
Change in total revenue divided by change in quantity
Term 50
Definition 50
Total costs
Total fixed cost plus total variable cost
Term 51
Definition 51
Average Fixed Cost
Total fixed cost divided by quantity
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Term 52
Definition 52
Average variable cost
Total variable cost divided by quantity
Term 53
Definition 53
Average total cost
Total cost divided by quantity
Term 54
Definition 54
Marginal Cost
Change in total cost divided by change in quantity
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Term 55
Definition 55
Profits are maximized when: Profit maximization with MRP (MRP1 / Price of input 1) = (MRPn / Price of input n)
Term 56
Definition 56
Value of goods and services included in GDP measured at current prices Nominal GDP Nominal GDP = quantity produced in Year t * Prices in Year t
Term 57
Definition 57
Refers to the value of goods included in GDP measured at base-year prices Real GDP Real GDP = Quantity produced in Year t * Base-year prices
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Term 58
Definition 58
GDP Deflator
[Value of current year output at current year prices / value of current year output at base year prices] * 100 [Nominal GDP / Real GDP] * 100
Term 59
Definition 59
Expenditure Approach of GDP Calculation
GDP = consumer spending on goods and services + Business gross fixed investment + Change in inventories + Government spending on goods and services + Government gross fixed investment + Exports - imports + Statistical discrepancy
Term 60
Definition 60
Income Approach of GDP Calculation
National income + Capital consumption allowance + Statistical discrepancy
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Term 61
Definition 61
Sum of incomes received by all factors of production used to generate final output National Income Employee compensation, corporate and government enterprise profits before taxes, interest income, rent and unincorporated business net income, indirect business taxes less subsidies
Term 62
Definition 62
Personal Income
National Income - Indirect business taxes - corporate income taxes undistributed corporate profits + transfer payments
Term 63
Definition 63
Personal income - personal taxes Personal disposable income aka Houseold consumption + Household saving
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Term 64
Definition 64
Potential GDP Growth rate
Long-term growth rate of labor force + Long-term labor productivity growth rate
Term 65
Definition 65
Money multiplier
1 / Reserve requirement
Term 66
Definition 66
Nominal interest rate (RN) reflects the real interest rate (RR) and the expected Fischer Effect inflation rate (C) RN = RR + C
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Term 67
Definition 67
Real Exchange Rate
SDC/FC * (PFC / PDC) SDC/FC = Nominal Spot exchange rate PFC = foreign price level (quoted in terms of the foreign currency) PDC = Domestic price level (qutoed in terms of the domestic currency)
Term 68
Definition 68
XX + M(M - 1) > 0 Where: X = Share of exports in total trade M = Share of imports in total trade X = Price elasticity of demand for exports M = Price elasticity of demand for imports
Definition 69
Marshall-Lerner condition
Term 69
Inventor Turnover
Cost of Goods Sold / Average Inventory
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Term 70
Definition 70
Days of Inventory on Hand (DOH)
365 / Inventory Turnover
Term 71
Definition 71
Receivables Turnover
Revenue / Average Recievables
Term 72
Definition 72
Days Sales Outstanding
365 / Receivables Turnover
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Term 73
Definition 73
Payables Turnover
Purchase / Average trade payables
Term 74
Definition 74
Number of Days Payables
365 / Payables Turnover
Term 75
Definition 75
Working Capital Turnover
Revenue / Average Working Capital
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Term 76
Definition 76
Fixed Asset Turnover
Revenue / Average Fixed Assets
Term 77
Definition 77
Total Asset Turnover
Revenue / Average Total Assets
Term 78
Definition 78
Current Ratio
Current Assets / Current Liabilities
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Term 79
Definition 79
Quick Ratio
[Cash + Short-term marketable investments + receivables] / Current liabilities
Term 80
Definition 80
Cash Ratio
[Cash + short-term marketable investments] / Current liabiliteis
Term 81
Definition 81
Defensive Interval Ratio
[Cash + short-term marketable investments + receivables] / Daily cash expenditures
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Term 82
Definition 82
Cash Conversion Cycle
DSO + DOH - Number of Days Payables
Term 83
Definition 83
Basic EPS
[Net income - Preferred dividends] / Weighted average number of shares outstanding
Term 84
Definition 84
Diluted EPS
[(Net income - Preferred dividends) + Convertible preferred dividends + (Convertible debt interest * (1 - t))] / [Weighted average shares + Shares from conversion of convertible preferred shares + Shares from conversion of convertible debt + Shares issuable from stock options
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Term 85
Definition 85
Debt-to-Assets Ratio
Total Debt / Total Assets
Term 86
Definition 86
Debt-to-Capital Ratio
Total Debt / [Total debt + Shareholders Equity]
Term 87
Definition 87
Debt-to-Equity Ratio
Total Det / Shareholders' Equity
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Term 88
Definition 88
Financial Leverage Ratio
Average Total Assets / Average Total Equity
Term 89
Definition 89
Interest Coverage Ratio
EBIT / Interest Payments
Term 90
Definition 90
Fixed Charge Coverage Ratio
[EBIT + Lease Payments] / [Interest Payments + Lease Payments]
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Term 91
Definition 91
Gross Profit Margin
Gross Profit / Revenue
Term 92
Definition 92
Operating Profit Margin
Operating Profit / Revenue
Term 93
Definition 93
Pretax Margin
EBT (Earnings before tax, but after interest) / Revenue
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Term 94
Definition 94
Net Profit Margin
Net Profit / Revenue
Term 95
Definition 95
Return on Assets
Net Income / Average Total Assets
Term 96
Definition 96
Adjusted Return on Assets
[Net Income + (Interest Expense * (1-t)] / Average total assets
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Term 97
Definition 97
Operating Return on Assets
Operating Income or EBIT / Average total assets
Term 98
Definition 98
Return on Total Capital
EBIT / [Short-term debt + long-term debt + equity]
Term 99
Definition 99
Return on Equity
Net Income / Average Total Equity
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Term 100
Definition 100
Return on Common Equity
[Net Income - Preferred Dividends] / Average Common Equity
Term 101
Definition 101
DuPont Decomposition of ROE
Net Income / Average Shareholders' Equity
Term 102
Definition 102
2-Way DuPont Decomposition of ROE
[Net Income / Average total Assets] * [Average Total Assets / Average Shareholders' Equity] ROA * Leverage
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Term 103
Definition 103
3-Way DuPont Decomposition of ROE
[Net Income / Revenue] * [Revenue / Average total assets] * [Average total assets / average shareholders' equity] Net Profit Margin * Asset Turnover * Leverage
Term 104
Definition 104
5-Way Dupont Decomposition
[Net Income / EBT] * [EBT / EBIT] * [EBIT / Revenue] * [Revenue / Average Total Assets] * [Average total assets / Average shareholders' equity] Tax Burden * Interest Burden * EBIT Margin * Asset turnover * Leverage
Term 105
Definition 105
Effective Annual Yield
EAY = [(1+HPY)365/t] - 1 HPY = holding period yield t = number of days until maturity
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Term 106
Definition 106
Bond Equivalent Yield
BEY = [(1+EAY).5 - 1]
Term 107
Definition 107
2 = (xi-)2 / N Population Variance
Variances = observation population mean
Term 108
Definition 108
Sample Variance
s2 = (xi-X)2 / (n-1)
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Term 109
Definition 109
Covariance (expected value)
Cov (XY) = E{[X - E(X)][Y - E(Y)]} Cov (RA,RB) = E{[RA - E(RA)][RB E(RB)]}
Term 110
Definition 110
Correlation Coefficient
Corr (RA,RB) = Cov (RA,RB) / [(A)(B)]
Term 111
Definition 111
FDC/FC = (1 / SFC/DC) * [(1 + rDC) / (1 + rFC)] Forward Rate or FDC/FC = SDC/FC * [(1 + rDC) / (1 + rFC)]
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Term 112
Definition 112
Ft = St+1 Forward Rate as expected future spot rate [(St + 1) / S] - 1 = % change in S(DC/FC)t + 1 = (rDC - rFC) / (1 + rFC)
Term 113
Definition 113
Number of Days Payables
365 / Payables Turnover
Term 114
Definition 114
Cash Conversion Cycle
DSO + DOH - Number of Days Payables
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Term 115
Definition 115
Interest Coverage Ratio
EBIT / Interest Payments
Term 116
Definition 116
Retention Rate
1 - Dividend Payout Ratio
Term 117
Definition 117
Sustainable Growth Rate
Retention Rate * ROE
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Term 118
Definition 118
Net Present Value
Sum of discounted cash flows - Initial Cash Outlay [CFt / (1 + r)t] - Outlay
Term 119
Definition 119
Internal Rate of Return
Discount rate that equates the cash flows with the initial cash outlay [CFt / (1 + IRR)t] = Outlay
Term 120
Definition 120
Profitability Index
PV of Future Cash flows / Initial Investment or 1 + [NPV / Initial Investment]
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Term 121
Definition 121
WACC = [(w d)(rd)(1 - t)] + [(w p)(rp)] + [(w c)(rc)] Weighted Average Cost of Capital p = preferred stock c = common equity d = debt
Term 122
Definition 122
Capital Asset Pricing Model
rc = Rf + B[E(RM) - RF]
Term 123
Definition 123
P0 = D1 / [rc - g] g = expected constant growth rate of dividends rc = required rate of return on common equity Rearranges to: rc = [D1 / P0] + g
Dividend Discount Model
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Term 124
Definition 124
To Unlever the Beta
Asset = Equity * [1 / (1 + (1-t)*(D/E))]
Term 125
Definition 125
To Lever the Beta
Project = Asset * [1 + ((1-t)*(D/E))]
Term 126
Definition 126
rc = Rf + [E(RM) - RF + CRP] or Country Risk Premium Sovereign yield spread * (Annualized SD of equity index / Annualized SD of Sovereign bond market in terms of the developed market currency)
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Term 127
Definition 127
Break Point
Amount of capital at which a component's cost of capital changes / proportion of new capital raised from the component
Term 128
Definition 128
Degree of Operating Leverage
DOL = Percent Change in Operating Income / Percent change in units sold
Term 129
Definition 129
[Q * (P - V)] / [(Q * (P - V)) - F] Q = number of units sold P = Price per unit Degree of Operating Leverage Formula V = Variable operating cost per unit F = Fixed operating cost Q * (P - V) = Contribution Margin (amount that units sold contribute to covering fixed costs
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Term 130
Definition 130
Degree of Financial Leverage
DFL = Percentage Change in Net Income / Percentage Change in Operating Income
Term 131
Definition 131
DFL = [Q(P - V) - F] / [Q(P - V) - F - C] Q = number of units sold Degree of Financial Leverage Formula P = Price per unit V = Variable operating cost per unit F = Fixed operating cost C = Fixed financial cost
Term 132
Definition 132
Degree of Total Leverage
Percentage Change in Net Income / Percentage Change in the Number of Units Sold
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Term 133
Definition 133
DTL = DOL * DFL Degree of Total Leverage Formula DTL = [Q * (P - V)] / [Q * (P - V) - F - C]
Term 134
Definition 134
PQ = VQ + F + C P = Price per unit Q = Number of units produced and sold V = Variable cost per unit F = Fixed operating costs C = Fixed financial costs QBE = (F + C) / (P - V)
Term 135 Definition 135
Break Point Formula
PQOBE = PV + F QOBE = F / (P - V) P = Price per unit Q = Number of units produced and sold V = Variable cost per unit F = Fixed operating costs
Operating Break Even Point
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Term 136
Definition 136
Current Ratio (CorpFin)
Current Assets / Current Liabilities
Term 137
Definition 137
Quick Ratio (CorpFin)
(Cash + Short term marketable investments + receivables) / Current Liabilities
Term 138
Definition 138
Accounts Receivable Turnover (CorpFin)
Credit Sales / Average Recievables
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Term 139
Definition 139
Inventory Turnover (CorpFin)
Cost of Goods Sold / Average Inventory
Term 140
Definition 140
Inventory / Average day's COGS Number of Days of Inventory (CorpFin) Inventory / [COGS / 365]
Term 141
Definition 141
Payables Turnover (CorpFin)
Purchases / Average Trade Payables
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Term 142
Definition 142
Number of Days of Payables (CorpFin)
Accounts payables / Average day's purchases Accounts payables / [Purchases / 365]
Term 143
Definition 143
Purchases (CorpFin)
Ending Inventory + COGS - Ending Inventory
Term 144
Definition 144
Number of Days of Inventory + Number of Days of recievables Operating Cycle (CorpFin) [Inventory / [COGS / 365]] + [Accounts Receivable / [Sales on Credit / 365]]
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Term 145
Definition 145
Money Market Yield (CorpFin)
[(Face value - price) / Price] * [360 / Days] HPY * [360 / Days]
Term 146
Definition 146
Bond Equivalent Yield (CorpFin)
[(Face value - price) / Price] * (365/Days) HPY * (365/Days)
Term 147
Definition 147
Discount Basis Yield (CorpFin)
[(Face value - price) / Face Value] * (360/Days) % Discount * (360/Days)
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Term 148
Definition 148
[1 + (Discount / (1 - Discount))][365 / Days beyond discount period] - 1 Cost of Trade Credit (aka Implicit Rate) Not sure if -1 is raised up or not
Term 149
Definition 149
R = [(PT + DT) / P0] - 1 Holding Period Return PT = Price at end DT = Dividends paid P0 = Price at the beginning of the period
Term 150
Definition 150
R = [(1 + R1)*(1 + R2)*...*(1 + RN)] - 1 Holding Period return - multiple periods Rs are sub-period returns **Return for WHOLE period
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Term 151
Definition 151
Geometric Mean Return
R = [[(1 + R1)*(1 + R2)*...*(1 + RN)](1/n)] - 1 **ANNUAL return
Term 152
Definition 152
p = [w 1212 + w 2222 + Standard deviation of a portfolio of Two Risky Assets 2w 1w 2121,2]1/2 or [w 1212 + w 2222 + 2w 1w 2Cov1,2]1/2
Term 153
Definition 153
E(Rp) = w 1Rf + (1-w 1)E(Rm) Expected Return on Portfolios that lie on CML w 1 = Weight in risk free asset E(Rm) = expected market return
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Term 154
Definition 154
Variance of portfolios that lie on CML
2 = [w 122f + (1-w1)22m + 2w 1(1w 1)Cov(Rf,Rm)]1/2
Term 155
Definition 155
E(Rp) = Rf + [(E(Rm) - Rf)/m] * p Equation of CML Slope ((E(Rm) - Rf)/m) is the market price of risk
Term 156
Definition 156
Total Risk
Systematic + Unsystematic Risk
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Term 157
Definition 157
Calculation of Beta
i = Cov(Ri,Rm) / 2m = [i,mim] / 2m = i,mi / m
Term 158
Definition 158
P0 * [(1-Initial Margin) / (1-Maintenance Margin)] Calculating a Margin Call Gives price at which an investor who goes long on a stock recieves a margin call
Term 159
Definition 159
Price Weighting
w iP = Pi / Pi
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Term 160
Definition 160
w iM = QiPi / QjPj where: w i = Fraction of the portfolio that is allocated to security i or weight of security i Qi = Number of shares outstanding of security i Pi = Share price of security i N = Number of securities in the index
Definition 161
Market Cap Weighting
Term 161
Non-callable, non-convertible, no maturity date, and pays fixed dividends: V0 = D 0 / r Value of a Preferred Stock Non-callable, non-convertible, preferred stock with maturity at time n: V0 = Dt / (1+r)t + [F / (1+r)n] where: V0 = value of preferred stock today (t = 0) Dt = expected dividend in year t, assumed to be Definition 162 end of the paid at the year r = required rate of return on the stock F = par value of preferred stock Value of option-free bond - value of embedded call option
Term 162
Callable Bond Price
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Term 163
Definition 163
Putable Bond Price
Value of Option-free bond + value of embedded put option
Term 164
Definition 164
Relative Yield Spread
[Yield on Bond X-Yield on Bond Y] / Yield on Bond y Bond Y is the reference bond
Term 165
Definition 165
Yield Ratio
Yield on Bond X / Yield on Bond Y
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Term 166
Definition 166
After-Tax Yield
Pretax Yield * (1-Marginal Tax Rate)
Term 167
Definition 167
Taxable-Equivalent Yield
Tax Exempt Yield / (1-Marginal Tax Rate)
Term 168
Definition 168
Current Yield
Annual Cash Coupon / Bond Price
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Term 169
Definition 169
[V--V+] / [2*V0(y) where: y = change in yield in decimal V0 = initial price V- = price if yields decline by y V+ = price if yields increase by y
Duration
Term 170
Definition 170
Portfolio duration = w 1D1 + w 2D2 +...+ w NDN Portfolio Duration where: N = Number of bonds in portfolio. Di = Duration of Bond i. w i = Market value of Bond i divided by the market value of portfolio
Term 171
Definition 171
Price Balue of a Basis Point
Duration * .0001 * Bond Value
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Term 172
Definition 172
Floating Rate Agreement Payoff
[Floating rate at expirationFRA rate* (days in floating rate/360)] / [1+ [Floating rate at expiration*(days in floating rate/360)]
Term 173
Definition 173
Intrinsic Value of a Call Option
Max [ 0, (ST - X)
Term 174
Definition 174
Intrinsic Value of a Put Option
ST < X: X - ST ST = X: 0 ST > X: 0
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Term 175
Definition 175
Put-Call Parity
C0 + [X / (1+RF)T] = P0 + S0
Term 176
Definition 176
Minimum: ECT 0 European Call Option Value Limits Maximum: ECT ST
Term 177
Definition 177
Minimum: ACT 0 American Call Option Value Limits Maximum: ACT ST
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Term 178
Definition 178
Minimum: EPT 0 European Put Option Value Limits Maximum: EPT [X / (1+RFR)T
Term 179
Definition 179
Minimum: APT 0 American Put Option Value Limits Maximum: APT X
Term 180
Definition 180
European Call Option Value Bounds
Minimum: Max [0, ST - [X / (1+RFR)T] Maximum: ST
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Term 181
Definition 181
American Call Option Value Bounds
Minimum: Max [0, ST - [X / (1+RFR)T] Maximum: ST
Term 182
Definition 182
European Put Option Value Bounds
Minimum: Max [0, [X / (1+RFR)T] - ST] Maximum: X / (1+RFR)T
Term 183
Definition 183
American Put Option Value Bounds
Minimum: Max [0, X - ST] Maximum: X
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Term 184
Definition 184
Interest Rate Call Holder's Payof
Max (0, Underlying rate at expiration Exercise Rate) * [(Days in underlying rate*NP) / 360] where: NP = Notional Principal
Term 185
Definition 185
Interest Rate Put Holder's Payoff
Max (0, Exercise rate - Underlying Rate at Expiration) * [(Days in underlying rate*NP) / 360] where: NP = Notional Principal
Term 186
Definition 186
(Swap fixed rate - LIBORt-1 ) * (No. of days/360) * (NP) Net Payment for a Fixed-Rate-Payer where: NP = Notional Principal
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Term 187
Definition 187
Price-to-Earnings Ratio
Price per share / Earnings per share
Term 188
Definition 188
Price to Cash Flow
Price per share / Cash flow per share
Term 189
Definition 189
Price to Sales
Price per Share / Sales per share
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Term 190
Definition 190
Price to Book Value
Price per Share / Book Value per Share
Term 191
Definition 191
Free Cash Flow to the Firm
FCFF = NI + NCC + [Int * (1-t)] - FCInv WCInv FCFF = CFO + [Int * (1-t)] - FCInv
Term 192
Definition 192
Free Cash Flow to Equity
FCFE = CFO - FCInv + Net Borrowing
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3/12/13

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Future Value of a Single Cash Flow

Present Value of a Perpetuity

PV(perpetuity) = PMT / (I/Y)

Future Value with continuous compounding

FVn = PV * (ers *N)

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Effective Annual Rates

EAR = (1+Periodic interest rate)N - 1

Net Present Value

NPV = [CFt / [(1+r)t]

Bank Discount Yield

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Holding Period Yield

Effective Annual Yield

Rmm = [360*rBD] / [360-(t*rBD)] Money Market Yield Rmm = HPY*(360/t)

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Rg = [[(1+r1) * (1+r2) ... (1+rt)](1/t)] - 1

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Internal Rate of Return

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Range = Maximum value - Minimum value

2 = (xi-)2 / N Population Variance

Variances = observation population mean

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s/X Coefficient of Variation Sample standard deviation / sample mean

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Addition rule for Probabilities

P(A or B) = P(A) + P(B) - P(AB)

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E(X) = P(xi)*xi xi = one of n possible outcomes

Covariance (expected value)

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Expected Return on a Portfolio

Sum of weight * expected return

Var(Rp) = Sum of (w i'*w j*Cov(Ri,Rj))

P(Event|Information) = [P(Information|Event) * P(Event)] / P(Information)

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Sampling error of the mean = Sample mean - Population mean =X-

Standard error (when population variance is known)

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Confidence intervals (amounts)

90% - x 1.65s 95% - x 1.96s 99% - x 2.58s Mean ...

Standard error when population variance is not known

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(Sample statistic-hypothesized value) / standard error of sample statistic

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Own-Price Elasticity of Demand

% Change in Demand / % Change in price

Income Elasticity of Demand

% Change in quantity demanded / % change in income

Cross-Price Elasticity of Demand

% Change in demand / % Change in price of substitute or complement

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Accounting Profit (Loss)

Total Revenue - Total Accounting Costs

Total Revenue divided by quantity

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Change in total revenue divided by change in quantity

Total fixed cost plus total variable cost

Average Fixed Cost

Total fixed cost divided by quantity

Rmm = [360rBD] / [360-(trBD)] Money Market Yield Rmm = HPY*(360/t)

Var(Rp) = Sum of (w i'w jCov(Ri,Rj))