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Fundamentals of Financial Reporting - Formula Sheet

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12 views7 pages

Fundamentals of Financial Reporting - Formula Sheet

Uploaded by

Alexander Bon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Fundamentals of Financial

Reporting
Fundamentals of Financial
Reporting
BASICS OF ACCOUNTING

Basic Accounting
Assets = Liabilities + Equity
Equation

Net income Net income = Revenue – Expenses

Gross profit (income) Gross profit (income) = Revenue – Cost of goods sold

Operating profit (income) =


Operating profit (income) = Profit before interest and tax (PBIT) = Gross profit – Operating expenses

Profit Before Tax (PBT) Profit before tax (PBT) = PBIT – Interest expense

Net profit (income) =


Net profit (income) = PBT – Tax expense =
= Operating profit – Interest Expense – Tax expense
Fundamentals of Financial
Reporting
UNDERSTANDING INCOME STATEMENTS

Net Income - Preferred Dividends


Basic Earnings Basic EPS =
per Share (EPS) Weighted average number of
common shares outstanding

Diluted Earnings Adjusted income available for common shares


per Share (DEPS) Diluted EPS =
Weighted average common and potential
common shares outstanding

[ ][ ][ ]
Convertible Convertible
Net
- Preferred
income dividends + preferred + debt (1 - t)
dividends interest

)( )(
Diluted EPS =

( )( )
Shares from Shares from Shares
Weighted
average shares + conversion of + conversion of + issuable from
conv. pfd. shares conv. debt stock options

Gross profit
Gross profit margin Gross profit margin =
Revenue

Net profit
Net profit margin Net profit margin =
Revenue
Fundamentals of Financial
Reporting
UNDERSTANDING BALANCE SHEETS

LIQUIDITY RATIOS

Current assets
Current ratio Current ratio =
Current liabilities

Cash + Short-term marketable securities + Receivables


Quick ratio Quick ratio =
Current liabilities

Cash + Short-term marketable securities


Cash ratio Cash ratio =
Current liabilities

SOLVENCY RATIOS

Long-term debt
Long-term Long-term debt-to-equity =
Total equity
debt-to-equity

Total debt
Total debt-to-equity Total debt-to-equity =
Total equity

Debt ratio Total debt


Debt ratio =
Total assets

Financial leverage Total assets


Financial leverage =
Total equity
Fundamentals of Financial
Reporting
UNDERSTANDING CASH FLOW STATEMENTS

FREE CASH FLOW MEASURES

CFO = Cash flow from operations


Int = Cash interest paid
FCFF = CFO + [Int × (1 – tax rate)] – FCInv
FCInv = Fixed capital investment
(net capital expenditures)

NI = Net income
NCC = Non-cash charges
(depreciation and amortization)
FCFF = NI + NCC + [Int × (1 – tax rate)] – FCInv - WCInv Int = Cash interest paid
FCInv = Fixed capital investment
(net capital expenditures)
WCInv = Working capital investment

CFO = Cash flow from operations


FCInv = Fixed capital investment
FCFE = CFO – FCInv + Net borrowing
(net capital expenditures)
Net borrowing = Debt issued – debt repaid

CASH FLOW RATIOS


PERFORMANCE RATIOS

Cash flow from operations


Cash flow-to-revenue Cash flow-to-revenue =
Revenue

Cash flow from operations


Cash-to-income Cash-to-income =
Operating income

Cash flow from operations


Cash return-on-assets Cash return-on-assets =
Average total assets

Cash flow from operations


Cash return-on-equity Cash return-on-equity =
Average total equity

CFO - Preferred dividends


Cash flow per share Cash flow per share =
Weighted average number of
common shares
Fundamentals of Financial
Reporting
UNDERSTANDING CASH FLOW STATEMENTS

CASH FLOW RATIOS


COVERAGE RATIOS

Cash fow from operations


Debt coverage Debt coverage =
Total debt

CFO + Interest paid + Taxes paid


Interest coverage Interest coverage = Interest paid

Cash flow from operations


Reinvestment ratio Reinvestment ratio =
Cash paid to acquire long-term assets

Cash flow from operations


Debt payment Debt payment =
Cash paid to repay long-term debt

Cash flow from operations


Dividend payment Dividend payment =
Dividends paid

Cash flow from operations


Investing and Investing and financing ratio =
financing ratio Cash outflows from investing
and financing activities

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