EM302 Formula Sheet 2013
EM302 Formula Sheet 2013
EM302 Formula Sheet 2013
Current Ratio =
Current Liabilities
Working Capital = Current Assets Current Liabilities
Quick Ratio =
Debt Ratio =
Current Assets-Inventories
Current Liabilities
Total Debt
Total Assets
Times-Interest-Earned Ratio =
Revenue
Interest Expense
Net Income
EBIT
Gross Margin
Revenue
Net Income
Total Assets
Net Income (or EBIT)
Average of two years Total Assets
Average Fixed Cost (AFC) = Total Fixed Cost (TFC) / Total Units Produced
Unit Cost = Total Cost / Number of units produced
-1-
F P (1 iN )
F P(1 i) N
Where F = Future value, P = Present Value, i = Interest rate, and N = Number of years
Where inom is the nominal interest, rreal is the real interest and iinf is inflation
Effective Annual Interest Rate (EAR): EAR i e (1 i / M ) 1
ie =Effective Interest Rate pa, i = Nominal Interest Rate pa, M = Number of interest periods pa
M
i d (1 i / CK ) C 1
Discrete Compounding:
id = Discrete Interest Rate per period, i = Nominal Interest Rate pa, C = Number of interest
periods per payment (deposit), K = Number of payments (deposits) per year
i ei / K 1
Continuous Compounding:
c
ic = Continuous Compounding Interest Rate per period, i = Nominal Interest Rate pa, K =
Number of payment periods per year
F
Average Inflation Rate or Compound Annual Growth Rate (CAGR): CAGR
P
Where F is the ending value, and P is the beginning value
-2-
1/ n
Pnom Preal 1 i n
F P (1 i ) N
Economic Equivalence:
0
N
P
Annuity:
PVA
P F (1 i ) N
N -1
1 i N 1
PA
i1 i N
FVA
(1 i ) N 1
FA
i
A0
(1 i )
A1
1 i
A2
1 i
AN
1 i
1 i
An
n 0
NPV
A0
(1 IRR)
A1
1 IRR
A2
1 IRR
AN
1 IRR
1 IRR
An
n 0
0 Or
1 i
n 1
An
A0 0
Annual worth analysis: Annual Equivalent costs = Capital costs + Operating costs
Capital Recovery Cost:
CR I S CRF i S
I is the purchase price of the asset, S is the salvage value after n years, CR is the annual
equivalent cost of ownership or the capital recovery cost, and
i(1 i ) n
(1 i ) n 1
-3-
Market Value of the company is a function of Total Equity and the Total Debt, that is:
Market Value of Company
E
Amount of
Equity (E)
Amount of
Debt (D)
Beta of company
Cost of Equity
Cost of Equity
Ke =
Rf
Risk-free rate
Company Risk
(Rm Rf)
Rf is risk-free rate, is measure of the risk of the company, Rm is the market rate, (Rm Rf) is
the Market Risk Premium
L
L
K d 1 K1 2
LT
LT
Cost of Debt
K n
K 2 n
LT
E
D
K e K d (1 T c)
V
V
E = Amount of Equity, D = Amount of Debt, V = Total Capital used (ie. V = E + D), Ke.= Cost
of Equity, Kd = Cost of Debt, Tc = Corporate tax rate (being 30% in Australia)
Funding Costs
E
D
FundingCost Fa Fe Fd
V
V
Depreciation Expense =
Depreciation Expense =
Operating Net
Cashflow
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