Direct Quote = Home Currency

Foreign Currency

Indirect Quote = Foreign Currency

Home Currency

Net Working Capital = Current Assets (CA) - Current Liabilities (CL)

Current Ratio = Current Assets

Current Liabilities

Quick Ratio/Acid Test Ratio = Cash + Receivables + Marketable securities or Current Assets - Inventory - Prepayments
Current Liabilities Current Liabilities

Cash Ratio = Cash + Cash Equivalents + Marketable securities No accounts receivables

Current Liabilities

Inventory Turnover Ratio = Cost of Goods Sold

Average Inventory

Inventory Conversion Period = 365 or Ending Inventory

365 x
Inventory Turnover Ratio Cost of Goods Sold

Receivable Turnover Ratio = Credit Sales

Average Accounts Receivable

Receivable Collection Period = 365 or Ending Accounts Receivable

365 x
Receivable Turnover Ratio Sales

Payable Turnover Ratio = Credit Purchases

Average Accounts Payables

Payable Deferral Period = 365 or Ending Accounts Payable

365 x
Payable Turnover Ratio Credit Purchases

Operating Cycle = Inventory Conversion Period + Receivable Collection Period

Cash Cycle = Inventory Conversion Period + Receivable Collection Period - Payable Deferral Period
Or
= Operating Cycle - Payable Deferral Period
Annual Financing Cost = Discount % 365
x
(Discount offered by supplier) (100% - Discount%) Discount Period
Square root formula in excel
=sqrt
Economic Order Quantity (EOQ) = 2 x Annual Demand x Ordering Cost
Carrying Cost per unit

Re-order Point = (Average daily demand x Average lead time) + Safety Stock

Degree of Operating Leverage = % Change in EBIT or Contribution

(Business Risk) % Change in Sales Quantity EBIT

Higher operating leverage implies a greater change in profits due to changes in sales volume as revenues would decline, but the fixed cost would remain the same.

Degree of Financial Leverage = % Change in Net Income or EBIT

% Change in EBIT EBT

Degree of Financial Leverage measures the sensitivity of Net Income to Change in EBIT because of Fixed Interest Burden
A relatively small change in EBIT results in a large change in common shareholders’ return

Cost of Debt (Kd) = Pre-Tax Cost of Debt x (1 - Tax %)

Cost of Debt (Kd) (Approximation) = Interest x (1 - Taxes) + (Redemption Price - Issue Price)/Bond Life
(Redemption Price + Issue Price)/2

Cost of Irredemable Preference Share = Dividend (D)

(Kp) Price (P0)

Cost of Reedemable Preference Share = Dividend + (Redemption Price - Issue Price)/Life

(Kp) (Approximation) (Redemption Price + Issue Price)/2

Cost of Equity (Ke) (CAPM) = Rf + [B x (Rm - Rf)]

Rf Risk Free Rate of Return Rm Return on Market

Beta Sensitivity (Volatility) of stock in question to the entire market
% Change in Stock
% Change in Market

Cost of Equity (Ke) = Dividend Or Dividend

(Dividend Disc Model) No Growth Value of Common Stock (P0) - Flotation Costs (if any) Ke
Cost of Equity (Ke) = D1 G= Growth Rate Or D1
+G
(Dividend Disc Model) Growth P0 - Flot Costs Ke-G

Growth rate = Return on Equity x Retention Ratio

Retention Ratio = 1 - Dividend Payout Ratio

Weighted Average Cost of Capital (Kc) = (Wd x Kd) + (We x Ke) + (Wp x Kp)

Highest Excess Profitability Index = PV of cash inflows

x 100
Investment outlay

Rate of Inflation or Deflation = CPIn - CPIn-1

CPIn-1

Multiplier Effect = Change in Spending/Marginal Propensity to Save

Price elasticity of Demand (Ep) = % Change in Quantity / % Change in Price

Price elasticity of Supply (Es) = % Change in Quantity Supplied / % Change in Price

Economic Value Added = Net Operating Profit After Taxes (-) Cost of Financing (i.e. WACC)

Return on Investment (ROI) = Net Income

Average Total Assets (Total Assets - Current Liability) or (Non-Current Liability + Equity)

Residual Income = NOPAT - Cost of equity capital employed

Free Cash Flow Available to Firm = NOPAT + Depreciation + Amortization - Capital expenditures - Net increase in working capital requirement
Free Cash Flow Available to Equity = Free Cashflow to Firm + Net Borrowings - After Tax Interest

Fixed Asset Turnover = Net Sales

Average Net Fixed Assets

Return on Assets = Net income

Average Total Assets

Return on Equity = Net income

Shareholder's equity

Debt to Total Assets = Total Liabilities

Total Assets
Debt to Equity Ratio = Total Liabilities
Total Equity

Time Interest Earned Ratio = Earnings before interest and taxes (EBIT)
Interest Coverage Ratio Interest expense

Equity Multiplier = Total Assets

Equity

Price / Earnings (PE) Ratio = MPS

EPS

Market Price / Book Ratio (PB Ratio) = Market price per share or Market Capitalization
Book value per share Common stock equity

No. of Units at Breakeven = Fixed Cost / Contribution per unit

Break-Even Sales = Fixed Cost / Contribution Margin Contribution Margin = Contribution / Sales
No. of Units for desired profit = (Fixed Cost + Desired Profit) / Contribution per unit
Sales for desired profit = (Fixed Cost + Desired Profit) / Contribution Margin
If asked for net income that convert net income to PBT by using formula [Net Income / (1-Tax Rate)]

Margin of Safety = Current Sales - Breakeven Sales

Margin of Safety % = Margin of Safety / Current Sales

High Low Method = Variable Cost per unit = Change in Cost

Change in Quantity
Used to seggregate the Fixed and Variable Cost

Overhead Application Rate = Budgeted Overhead

Budgeted Hours
Applied Overhead = Actual Hours x Pre-Determined Overhead Rate

Sales Price Variance = Actual Quantity x (Actual Price - Standard Price) Kya sale price estimate kiya tha but actual me kis rate par sale kiya

Material Variance = Direct Material Price Variance = Actual Quantity Purchased x (Standard Price - Actual Price)
Material price estimate kya kiya tha or kharida kitne ka

Direct Material Usage Variance = Standard Price x (Standard Quantity - Actual Quantity Used)
Kitna material estimate kiya tha ki use hoga or laga kitna
Labor Variance = Direct Labor Rate Variance = Actual Hours x (Standard Rate - Actual Rate)
Labor rate estimate kya kiya tha or labor mili kis rate par

Direct Labor Efficiency Variance = Standard Rate x (Standard Hours - Actual Hours)
Kitne labor hours estimate kiye the or lage kitne

Overhead Variance = Variable Overhead Variance

Variable Overhead Rate Variance = Actual Hours x (Standard Rate - Actual Rate)
Kya cost estimate ki thi variable overheads ki or lagi kitni

Variable Overhead Efficiency Variance = Standard Rate x (Standard Hours - Actual Hours)

Fixed Overhead Variance

Overhead Spending Variance = Budgeted Fixed Overhead - Actual Fixed Overhead
Production Volume Variance = Applied Fixed Overhead - Budgeted Fixed Overhead

Price variance would be based on actual quantity/hours

Usage/efficiency variance would be based on standard price/rate