FIN 300 Study Guide - Final Guide: Dupont Analysis, Asset Turnover, Dividend Yield
16 May 2018
School
Department
Course
Professor
Cash Flow
Total Assets = Total Liabilities + Total Equity
TL and OE = current liabilities + long term debt + common stock + retained earnings
Cash Flow Identity = CF Assets (or Free Cash Flow) = CF Creditors + CF Stockholders
CF Assets (or Free Cash Flow) = OCF – NCS – additions to NWC
CF Creditors = interest paid – net new borrowing
(include interest exp.)
Net New Borrowing = long term debt.end – long term debt.beg
CF Stockholders = dividends paid – net new equity raised
Net New Equity Raised = common stockend - common stock beg OR CF Assets – CF
Creditors
CF Assets (or Free Cash Flow) = OCF – NCS – additions to NWC
OCF = net income + dep’n + interest paid OR EBIT + dep’n – taxes
NCS = net fixed assets end – net fixed assets beg + dep’n
NWC = current assets – current liabilities
Additions to NWC = NWC end – NWC beg (+ is use of cash, - is source)
NCS = change in NFA + dep’n
Financial Ratios
Short-Term Solvency/Liquidity:
Current ratio =
Quick Ratio =
Cash Ratio =
NWC =
Interval Measure =
Long-Term Solvency/Financial Leverage:
Total Debt Ratio =
OR
OR 1 +
Debt/Equity Ratio =
Equity Multiplier =
OR 1 +
OR
Long-Term Debt =
Times Interest Earned =
Cash Coverage Ratio =
Asset Utilization Turnover:
Inventory Turnover =
Days’ Sales in Inventory =
Receivables Turnover =
Days’ Sales in Receivables (Avg. collection period) =
NWC Turnover =
Fixed Asset Turnover =
Total Asset Turnover =
OR
Profitability:
Profit Margin =
OR
OR profit margin x asset turnover
Return on Assets (ROA) =
OR profit margin x total asset turnover
Return on Equity (ROE) =
OR DU PONT ANALYSIS
Market Value:
Price Earning Ratio =
Market to Book Ratio =
EV/EBITDA =
KEY FINANCIAL RATIOS:
Retention/Plowback Ratio =
OR
OR 1 – dividend
payout
Dividend Payout (1-R) =
Capital Intensity Ratio =
DU PONT IDENTITY:
ROE = Profit Margin x Total Asset Turnover x Equity Multiplier
Growth Rates
Internal Growth Rate =
Sustainable Growth Rate =
R = 1 – dividend payout
Interest, Annuities, & Perpetuities
FV (Compounding)
Simple Interest: FV = PV x (1+tr)
Compound Interest: FV = PV x (1+r)t
Annuities (FV)
R x FV = C(1+r)t – C
FV = C x
Perpetuities
t or = 0
PV =
Growing Perpetuity (PV)
PV =
Present Values (Discounting)
Compound Interest: PV =
Annuities (Present Value)
R x PV = C –
PV = C x
Growing Annuity (PV)
PV =
Effect of Compounding
EAR = er - 1
APR = m
- 1
1 + EAR =
= (1 + EPR)f
m = compounding periods/yr
f = payment periods/yr
Additional Formulas
Full Capacity Sales =
Maximum Sales Growth =
– 1
Lump Sum: PV =
+
+
+ …OR FV = CF1(1+r)3 + CF2(1+r)2 + CF3(1+r) +
…
Avg. Daily Operating Costs =
TL and OE = current liabilities + LTD + common stock + RE
EBT =
EBIT = EBT + interest OR sales-costs-
dep’n
Net Income = dividends + addition to
RE
Avg. Tax Rate =
CALCULATIONS
Finding EFN:
1) Use Pro Forma income statement to determine change in sales (%). Costs
and NI change in proportion to sales.
2) Calculate retention and dividend payout ratios.
3) Find change in RE and add to Equity in Pro Forma as an ‘Addition to RE.’
4) Create Pro Forma balance sheet (debt does not change unless otherwise
stated; total A = L + E.
5) EFN = A - L – E
Interest, Annuities, & Perpetuities
Compound Interest:
n = # of periods
I% = interest rate/rate of
return/YTM/HPY/discount
PV = present value
PMT = periodic payments/cash inflows
per period
FV = future value/growth
P/Y = periods per year
C/Y = compounding periods per year
# of periods =
r =
– 1
t = ln
ln(1+r)
Growing Perpetuity:
PV =
OR
= next year’s expected cash flows
(dividend)
Amortization:
n = # of periods
I% = interest rate/rate of
return/YTM/HPY/discount
PV = present value
PMT = periodic payments/cash inflows
per period
FV = future value/growth
PM1 = 1st payment period
PM2 = 2nd payment period
BAL = balance after PM2
INT = total interest paid
PRN = total principal paid
EINT = INT PM1-PM2
EPRN = PRN PM1-PM2
Mortgages:
C/Y = 2, FV = 0, N = # of payments
remaining OR amortization period x #
of payments during year
Biweekly: P/Y = 26
Semi-Monthly: P/Y = 24
Down Payment: PV (always negative) = (price of house)(1-down payment %)
Mortgages and finding balance/interest after X years: input values for N, I%, PV,
PMT, and FV = 0. Press F6 (AMT), then PM1 + 1.
• EXAMPLE: mortgage after 5 years, monthly payments, 20-year mortgage
term » F6 (AMT), PM1 = 61[(5 yrs)(12 pmts)+1], PM2 = 240[(20 yrs)(12
pmts)] » F5 (sum of PRN).
• EXAMPLE: mortgage balance 5 years remaining, monthly payments, 20-
year mortgage term [20 yrs-5yrs = 15 yrs] » F6 (AMT), PM1 = 181[(15
yrs)(12 pmts)+1], PM2 = 240[(20 yrs)(12 pmts)] » F5 (sum of PRN).
• EXAMPLE: first 5 years, monthly payments, 20-year term » F6 (AMT),
PM1 = 0[(0 yrs)(12pmts)+1], PM2 = 60[(5 yrs)(12 pmts)] » F4 (sum of
INT).
• EXAMPLE: last 5 years remaining, monthly payments, 20 year term [20
yrs-5yrs = 15 yrs] » F6 (AMT), PM1 = 181[(15 yrs)(12 pmts)+1], PM2 =
240[(20 yrs)(12 pmts)] » F4 (sum of INT).
Depreciation (UCC and CCA):
Year
Beginning UCC
CCA (30%)
Ending UCC
1
$200k
($400k/2)
$60k ($200k*30%)
$140k
(Beg. UCC - CCA)
2
$340k ($200k+$140k)
$102k ($340k*30%)
$238k
(Beg. UCC - CCA)
3
$238k
$71400
($238k*30)
$166.6k
(Beg. UCC - CCA)
Sold for $200k => CCA recapture = $33.4k ($200k-$166.6k).
Sold for $140k => Deductible Terminal Loss = $26.6k ($166.6k-$140k).
APR: interest rate per period x # of periods in a year.
EAR: APR expressed with annual compounding.
EPR: actual periodic interest rate (i.e. Canadian mortgage)
EAR EPR AND APR CALCULATIONS:
Inconsistent Annuities:
When cash flows are different every year » TVM » F3: cash flow list » solve for NPV
(present value) or NFV (future value).
[Row 1 = year 0, row 2 = year 1…]. If cash flow and payment starts in year 0, enter
in row 1.
PVIFA = 1 –
PVIF =
Chapter 7: Bond Valuation
If (interest rates , bond price ) or (yield , bond price ) or (bond yields , bond price
)
PV of Bonds: Input values for N, I%, PV = 0, PMT (% coupon x FV), and FV = 1000.
When not paid annually (i.e. semi-annually), N = 2N, I% =
, PMT =
If bond is between coupon payments: TVM > F6 > F4, where d1 = current date, d2 =
maturity date, RDV = par value, CPN = annual coupon, PRC = clean price, YLD =
YTM, INT = accrued interest, CST = dirty price. Find PRC/CST.
Accrued Interest: If semi-annual payments: 1)
2)
x
Price of 0 Coupon Bonds:
PV = PV (coupons) + PV (face value usually 1000)
PV =
# to sell =
Coupon Bonds Repayment: # to sell x (par value + coupon payment)
For zeroes: # to sell for zeroes x par value
Bond Yields: Input values for N, I% = 0, PV, PMT (% coupon x FV), and FV = 1000.
P/Y and C/Y = 1. Solve for I%.
Fisher Effect: 1 + R = (1+r)(1+h), where R = nominal, r = real, h = inflation
Yield to Maturity (YTM): TVM > F2 > Input values for N, I% = 0, PV, PMT, FV, P/Y
and C/Y. Solve for I%.
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Total assets = total liabilities + total equity. Tl and oe = current liabilities + long term debt + common stock + retained earnings. Cash flow identity = cf assets (or free cash flow) = cf creditors + cf stockholders. Cf creditors = interest paid net new borrowing. Net new borrowing = long term debt. end long term debt. beg. Cf stockholders = dividends paid net new equity raised. Net new equity raised = common stockend - common stock beg or cf assets cf (include interest exp. ) Cf assets (or free cash flow) = ocf ncs additions to nwc. Ocf = net income + dep"n + interest paid or ebit + dep"n taxes. Ncs = net fixed assets end net fixed assets beg + dep"n. Additions to nwc = nwc end nwc beg (+ is use of cash, - is source) Days" sales in receivables (avg. collection period) = (cid:2185)(cid:2203)(cid:2200)(cid:2200)(cid:2187)(cid:2196)(cid:2202) (cid:2183)(cid:2201)(cid:2201)(cid:2187)(cid:2202)(cid:2201) (cid:2185)(cid:2203)(cid:2200)(cid:2200)(cid:2187)(cid:2196)(cid:2202) (cid:2194)(cid:2191)(cid:2183)(cid:2184)(cid:2191)(cid:2194)(cid:2191)(cid:2202)(cid:2191)(cid:2202)(cid:2187)(cid:2201)
