FORMULA SHEET
CASH FLOWS
Operating cash flow (OCF) = EBIT + depreciation – taxes
Net capital spending (NCS) = purchases of fixed assets – sales of fixed assets
or
NCS = ending net fixed assets – beginning net fixed assets + depreciation
Changes in NWC = ending NWC – beginning NWC
Cash Flow to Creditors and Stockholders
Cash flow to creditors = interest paid + retirement of debt – proceeds from new debt
or
Cash flow to creditors = interest paid – net new borrowing
= interest paid – (ending long-term debt – beginning long-term debt)
Cash flow to stockholders = dividends paid + stock repurchases – proceeds from new stock issues
or
Cash flow to stockholders = dividends paid – net new equity raised = dividends paid – (ending common stock,
APIC & Treasury stock – beginning common stock, APIC & Treasury stock)
SHORT-TERM SOLVENCY RATIOS
Current ratio = Current assets ÷ Current liabilities
Quick ratio = (Current assets – Inventory) ÷ Current liabilities
Cash ratio = Cash ÷ Current liabilities
FINANCIAL LEVERAGE RATIOS
Total debt ratio = Total debt ÷ Total assets = (Total assets – Total equity) ÷ Total assets
Debt-equity ratio = Total debt ÷ Total equity
Equity multiplier = Total assets ÷ Total equity = 1 + debt-equity ratio
Times interest earned = Earnings before interest and taxes ÷ Interest
Cash coverage = (Earnings before interest and taxes + depreciation + amortization) ÷ Interest
TURNOVER RATIOS
Inventory turnover = Cost of goods sold ÷ Inventory
Days sales in inventory = 365 ÷ Inventory turnover
Receivables turnover = Sales ÷ Receivables
Days’ sales in receivables= 365 ÷ Receivables turnover
Total asset turnover = Sales ÷ Total assets
Days in inventory = Days in period ÷ Inventory turnover
PROFITABILITY MEASURES
Profit margin = Net income ÷ Sales
Return on assets = Net income ÷ Total assets
Return on equity = Net income ÷ Total equity
EBITDA margin = EBITDA ÷ Sales
MARKET VALUE RATIOS
Price-to-earnings ratio = Market price per share ÷ Earnings per share
Market-to-book ratio = Market price per share ÷ Book value per share
Market capitalization = Market price per share x Shares Outstanding
Enterprise Value (EV) = Market capitalization + Market value of interest bearing debt – cash
EV Multiple = EV ÷ EBITDA
DUPONT IDENTITY
ROA
ROA
ROE
=
ROE
=
Net Income
=
Sales
=
Profit margin
Net Income
Sales
Profit margin
x
Sales
Total assets
x
Total asset turnover
Sales
Total assets
Total assets turnover
Total assets
Total equity
X
Equity multiplier
COMPOUNDING AND DISCOUNTING
PV of Growing Annuity
T
C é æ 1+ g ö ù
ê1 - ç
PV =
÷ ú
r - g ê çè (1 + r ) ÷ø ú
ë
û
PV of Growing Perpetuity
PV =
Value of stock:
P0 =
D1
R-g
C
r-g
𝐷𝑁+1
𝐷1
(1 + 𝑔1 )𝑁
𝑅 − 𝑔2
𝑃=
[1 −
]+
𝑅 − 𝑔1
(1 + 𝑅)𝑁
(1 + 𝑅)𝑁
0