Compiled By: - CA.

Aditya Kumar Maheshwari

Quick Assets
Cash Expenses per Day

(Operating Cash Expense + Interest + Tax)

365

Debt Equity =
Ratio

Debt
Equity

(Debt = Long Term Funds & Debentures))

Equity Ratio

Equity
Equity + Total Debt

Debt Ratio

Proprietary
Ratio

EPS

Yield

Long Term Funds + PSC

Equity Shareholders Fund
Total Debt or TOL
Equity + Total Debt (TOL)

OP Ratio
=
Operating Profit
Sales

Equity
or Equity
Total Assets
Equity + TOL
NP Ratio
=
Net Profit
Sales

(Equity = (ESC+PSC+R&S))

PE Ratio
=
or Price Earning Ratio

Market Value per Share

Book Value per Share
Market Price Per Share
Earning Per Share

Du Pont Chart
ROE =
PAT * Sales
* Net Assets
Sales
Net Assets
Net Worth (NW)
ROE =

WIP TR =

FG TR =

Material Consumed
Avg Stock of RM

Factory Cost
Avg Cost of WIP

COGS
Avg. Stock of FG

Capital TR =

Fixed Assets TR =

WC TR =

Sales
`Avg. CE

Sales
Avg. Fixed Assets

Sales
Avg. WC

Debtors TR =
Sales
Avg. Debtors
Earning Yield =

Creditors TR =
Raw Material Purchase or COGS
Avg. Creditors
EPS*100
Market Value per Share

1.1 5 times =

AV @ 10% for 5 yrs (AV5)

1.1 5times = GT

(Assumption: The Cash Flow

is at the beginning of year)

1.1+1*1.1+1*1.1+1*1.1+1

PAT
EBIT

Future Value of
Present Amt (FVn)

= Equity + LTL Non Trade Invt.

= FA + Trade Invt. + WC

PBIT = PBIT + Non Trade Expense Non Trade Income

Time Value of Money

Ratio Analysis

CE
Or CE

ROA
=
PBIT or PAT
Total Assets

(b)

N = No. of Period

R * (1+i) 1
i

R = Equal Amt to be received / paid for n period

i = Interest Rate per period

Present Value
of Growing Perpetuity
EMI

=
=

Amount

k = Discounting Rate

kg

g = Growth Rate

Total Principal Amt

AV Factor of the period

365
Raw Material Turnover Ratio

WIP Holding Period

(In Days)

365
WIP Turnover Ratio

FG Holding Period
(In Months)

12
FG Turnover Ratio

Debtor Collection Period

(In Weeks)

52
Debtor Turnover Ratio

Creditor Payment Period

(In Months)

12
CreditorsTurnover Ratio

Operating Cycle

= (RM+WIP+FG) Storage Period

(+) Debtors Collection Period
(-) Creditors Payment Period

RM storage Period

Creditors Payment Period

Average A/c Payables

Avg. credit purchase/ day

Debtors Collection Period

Average A/c Receivables

Avg. Credit Sales per day

Finished Goods
Storage Period

= Average stock of Finished goods

Avg. cost of goods sold per day

IRR = Base Rate(Min) +

ARR
(Accounting
rate of Return)

D1 = D0 (1+G)

Indifference point: (Where EPS of 2 Alternatives are Same)

(EBIT I1)(1 t)
=
(EBIT I 2) (1 t)
E1
E2

in Rate * Desired(Amt) from Base

in Amount

(This is simple unitary method formula, practice IRR Calculation)

Ke = D1
P0

+ G

Average stock of RM
Avg. cost of RM Consumption/day

Effective Cost = (Factoring Commission + Interest) (Savings on Factoring)

of Factoring
Net amount Received from Factor

DCF (Discounted Cash Flow Method) / Growth Method:

Modigillani Miller Approach (Assuming no PSC):

Ke = Ko + D (Ko Kd)
D = Debt or Loan
E
E = Equity

EBIT
E 1 & E2
I 1 & I2
t

RM Storage Period
(In Days)

Rm = Rate of return of Mkt

Rf = Risk free return
b = Beta

= Indifference point
= Number of Equity Shares in Alternative 1 & 2
= Interest in Alternative 1 & 2
= Tax-rate

Overall Cost of Capital

Ko = (Kd * D) + (Kp* P) + (Ke * E)
D+P+E

Period

ROE
=
PAT
Equity or NW

Ke = Cost of equity

Ke = D1
D1 = Dividend of year 1
P0
P0 = Price of year 0
Earning Price Approach:
Ke = E1
E1 = Earnings of year 1
P0
Realized Yield Approach:
Ke = D1 + (P1-P0)
P1 = Price of year 1
P0
Capital Asset Pricing Model Approach (CAPM):

(e)

I = Interest Rate per

Future Value of
Annuity

RV = Redn Value

Ke = Rf + b ( Rm Rf)

P0 (1 + i) P0 = Present Amt

Note: (Fin. Leverage Formula in Du Pont Chart is different.)

NP = Net proceeds/Mkt. Price

Cost of Equity / Retained Earnings:

(a)
Dividend Price Approach:

(f)
1.1 * 4 times =

PD
NP

(c)

(Assumption: The Cash Flow

is at the end of year)

Compounding of Rs 1:
Future Value @ 10% for
th
5 yr (FV5)

K p = Cost of Pref. Shares

PD = Preference Dividend

Cost of Redeemable Preference Shares:

PD + (RV NP)
Kp = Cost of capital
Ke =
N
PD = Pref. Dividend
(RV + NP)
NP = Net Proceeds

(Assumption: The Cash Flow

is at the end of Year)

ROE = Profit Margin * Assets Turnover * Financial Leverage

ROI or ROCE
=
*
PBIT
Capital Employed

Kp =

(d)

Discounting of Rs. 1:
th
PV@10% for 5 yrs (PV5)

Future Annuity Value

@ 10% for 5 years (FAV5)

Profit Margin * Assets Turnover * Equity Multiplier

Alternative Formula,
ROE = EBIT * Sales
*
Sales
Net Assets

Cost of Irredeemable Preference Shares:

Calculation Steps through Calculator:

(PAT - Preference Dividend)

No of Equity Shares

Book Value Per Share = Net Worth-Pref Sh.Cap

No. of Equity Shares

PV Ratio
=
Contribution
Sales

DPS * 100 (Dividend Per Share)

MPPS
(Market Price Per Share)

MV / BV Ratio

Ratio Analysis

Capital
Gearing Ratio

Cost of Redeemable Debentures:

I (1 t) + (RV NP)
NP = Net proceeds
Kd =
N ___
RV = Redemption Value
(RV + NP)
N = No. of Yrs of Redemption

Turnover Ratios (TR)

RM TR =

t = Tax rate
NP = Net proceeds/market price

Working Capital Management

Debt Service Coverage Ratio (DSCR)

n
Earnings Available for Debt Service or PAT + Dep + Interest
Debt Service Commitments
(Interest + Installment)

Kd = I (1 t)
NP

Working Capital Management

Absolute Liquidity or = (Cash & Bank +Mkt. Sec.)

Cash Ratio
CL

Cash Expense per day =

Ratio Analysis

PBIT
Interest

K d = Cost of Debt
I = Interest amt

Investment Decision

Interest Coverage Ratio =

Cost of Irredeemable Debentures/Debt:

NPV

Payback period

PI

Financial Leverage:
(FL)

E = Equity

Alternative Formula:
OL
=

D = Debt
P = PSC

Tandon Committee: Maximum Permissible Bank Finance =

Average Annual Net Income

Initial Investment or Average Investment
PV of Inflow (-)

PV of Outflow

Total initial capital investment

Annual CFAT and other Annual Inflows
PV of Inflow
PV of Outflow
EBIT or
EBT

EBIT
EBIT - Interest

% Change in EBIT
% Change in Sales or Contribution

FL

% Change in EBT
% Change in EBIT

CL

% Change in EBT or PAT or EPS

Change in Sales %

75% of (CA-CL) or (75% of CA) CL or {75% of (CA- CCA)} CL

Method 1

Method 2

Method 3

Where, CCA is Core / Permanent Current Assets

Baumols Economic Order Quantity Model

Cash
=
Deposit
transaction.

2AO
C

Cash Deposit = Optimum cash balance

A = Annual cash disbursement

O =

Fixed cost per

Leverages

or Acid Test Ratio

Financing Decision

= QA or QA (QA = CA Stock Prapaid Exp.)

or Liquid Ratio
QL
CL
(QL = CL Bank OD - CC)

Dividend Coverage Ratio (CR)

Pref. Div. CR
Div CR
Eq. Div. CR
=
=
=
____PAT_______
PAT
PAT Pref. Div.
Pref. Div
Pref. Div & Eq. Div
Equity Div.

Financing Decision

Quick Ratio

Basic Defense Interval

Ratio Analysis

CA
CL

Financing Decision

Time Value of Money

Ratio Analysis

Current Ratio

Working Capital Management

Caultimates.com

Ratio Analysis

Important Formulae: Financial Management (CA - IPCC)

Operating Leverage:
(OL)
Combined Leverage:
(CL)

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C =

Cost of Rs. 1 p.a.

Cont. or
EBIT

Contribution
Cont. Fixed Cost

Contribution or (OL * FL)

EBT