FIN 300 Study Guide - Midterm Guide: Profit Margin, Cash Flow, Operating Cash Flow

• School: Ryerson University
• Department: Finance
• Course: FIN 300
• Professor: Mercy Anselm

Document Summary

1| networkingcapital(nwc)= currentassets currentliabilities netnewborrowing(nnb)= endingltd beginningltd. Netequityincrease= endingcommonshares - beginningcommonshares netincome= netsales cogs admin&selling expense . Depreciation interestpaid taxes(ebit interest*tax) cashflows: cashflowtocreditors= interestpaid nnb. Cashflowtoshareholders(owners) or = operatingcashflow netcapitalspending additonstonetworkingcapital(nwc) Taxes netcapitalspending= endingnfa beginningnfa + dep. Additionstonwc= endingnwc beginningnwc or operatingcashflow netcapitalspending cashflowfromassets. T. assets t. equity/t. assets debtequityratio= t. debt / t. equity or roe/(profit margin*totalassetturnover) efc 1. Longtermdebtratio= longtermdebt / long-term debt + t. equity timesinterestearned= ebit/interest cashcoverageratio= 2|balance: ta-tl&oe externalfinancingneeded(efn)= a*g - m*s0*(1+g)*rr a=totalassets|g=(s1-s0)/s0|s0=sales this year (t)| S=increase in sales|s1= sales next year (t+1)|m= profit margin (net income/sales rr:retentionratio; percent of net income not paid as dividend)|rr=1-payoutratio or 1-(dividends/netincome) retainedearningasfinance:internalgrowthrate=(roaxrr)/(1-roaxrr) Fullcapacitysales=c. sales/fixedassetcapacity(%) maxsalesgrowth={fullcapacitysales/c. sales)-1 3|futurevalue=presentvalue+ (r*pv*t) or =presentvalue(1+r)^t / =c(1+(r/m))^(t*m) presentvalue=futurevalue(1+r)^t. Growingcashflow:growingannuity: pv=c x [1- 1+g ^t] futurevalueannuity= c [(1 + r) C=pva/pvifa r-g 1+r r r pvif=1/ (1+r) t[pv=?] Currentshareprice:divindendpershare=payoutratio*earnings/payoutratio*earning*(1+g)^t presentvalue=div1+r)+divt/{1+r)+ (divt(endof)/(r-g))*(1/(1+r)^t(tillnext)) t - 1] pva=cxpvifa pvifa=[1-1/(1+r)^t] Derivativesecurities:options, futures & other securities whose value derives from the price of another, underlying, asset.