Essential Formulas to Learn

*Find the formulas key on the last page of this document.

Present Value
PV = FV/(1 + i)n

Population Variance
Population variance = 2 = ( Xi - )2 / N

Sample Variance
Sample variance = s2 = ( xi - x )2 / ( n - 1 )

Covariance
Covariance = (x,y)= [x- E[x])(y-E[y])]

Correlation
Corr(Rx,Ry)= COV(Rx,Ry)/ (Rx) (Ry)

Expected Return of a Portfolio

E(X) =P(x1)x1 + P(X2)X2 + ... + P(xn)xn

Z-Stat
Z-score = (observation population mean)/ standard deviation
Z-score = x- /

Standard Error
a) For Known population variance 1= / n
b) For Unknown population variance s1= s/ n

PVC's Guide for CFA Level-1 Exam

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Essential Formulas to Learn

Geometric Mean
Geometric Mean= {(1+X1) * (1+X2) * (1+X3) * .}(1/n) 1

Money Multiplier
Money Multiplier = 1/ reserve requirement

Real Exchange Rate

Real Exchange Rate= (Nominal E.R x Domestic price)/ foreign price

Price Elasticity of Demand

E= (dQ/Q) / (dP/P)

Current Ratio
current ratio = current assets / current liabilities

Quick Ratio
Quick Ratio = (cash + marketable securities + receivables) / current liabilities

Payables Turnover Ratio

Payables Turnover Ratio= purchases / avg trade payable

Receivables Turnover
Receivables Turnover Ratio= COGS / avg. inventory

Days Sales Outstanding

Day Sales Outstanding = 365 / Receivable turnover

PVC's Guide for CFA Level-1 Exam

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Essential Formulas to Learn

Cash Conversion Cycle

Cash Conversion Cycle = (days of inventory on hand) + (days of sales outstanding) - (no. of days
of payable)

DuPont Analysis ROE

ROE= (net income/ EBT) x (EBT/EBIT) x (EBIT/Revenue) x (Revenue/ avg. total asset) x (avg.
total assets/ avg. equity)

After Tax Cost of Debt

After-Tax Cost of Debt = Before Tax Cost of Debt (1 Tax Rate)

Cost of Equity: CAPM

Cost of Equity: CAPM= Re = rf + (rm rf) *

Cost of Preferred Stock

Kp = Dps / P

WACC
WACC= (Equit/Total Value) x Re + (Debt/Total Value) x Rd x (1-Tc )

Leading P/E: Also known as forward 12 months P/E

Leading P/E = (Market price per share)/ (Expected earnings per share)
Leading P/E = P0/E1

Constant Growth Valuation Model

Vo = DPS/ ke - gc

Futures Price
Futures price = Spot price (1 + Rf) + storage costs- convenience yield
PVC's Guide for CFA Level-1 Exam

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Essential Formulas to Learn

The Formula Key

Symbol

Description

Symbol

Description

PV

Present Value

EBIT

FV

Future Value

EBT

i
n

rf
rm

Required Return
No. of Periods
Standard
Deviation
Variance

Earnings before
Interest and
Taxes
Earnings before
Taxes
Risk Free Rate
Market Return
Beta

Xi

Subscript

Dps

Mean
No. of
Observations
Expected Value
of X
Probability of x

Re
Rd

Vo

dP

Change in
Quantity
Change in Price

Q
P

Quantity
Price

ke
gc

E[x]
P(x)

dQ

PVC's Guide for CFA Level-1 Exam

Kp

P0
E1

DPS

Cost of Preferred
Stock
Dividend Per
Share
Cost of Equity
Before Tax Cost
of Debt
Stock Price
Today
Earnings Per
Share After 1
Year
Value of Firm
Today
Dividend Per
Share
Required Return
Long Term
Constant Growth
Rate

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