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Finance rules, ROA = NI/TA, week 4, dividend payout ratio, ROE = NI/TE, (1…
Finance rules
week 3
CCC =days in sales + days in recievables - Cost in Payable
Payable turnover= COGS/ AP
Net income = (1-Tax rate ) x taxable income
Taxable income = EBIT - interest
Week 5
Pv = Fv/(1+r)^t
Fv = Pv(1+r)^t
time = Ln(FV/PV)/Ln(1+r)
r = (fv/pv)^(1/t) -1
week1/2
liquidity ration
current ratio = CA/CL
every 1 dollar in Cl is covered by X in CA
Quick ratio = CA-inventory/CL
inventory least liquid asset
cash ratio = Cash/CL
Financial leverage
total debt ratio TD = TA-TE/TA
Debt Equity Ratio = TD/TE
1 - equity multiplier
Equity Multiplier = TA/TE
1 + Debt to equity ratio
Time interest earned ratio = EBIT/interest
Cash coverage = (EBIT+ Depreciation)/Interest
TA = TD/TD ratio
Net working capital = CA - CL
Common-size value of inventory = Inventory/TA *100
ROA = NI/TA
ASSET MANAGMENT
Inventory turnover = COGS/inventory
Days on sales 365/ Inventory turnover
Receivable turnover = Sales/AR
365/R turnover
TA turnover = Sales/TA
Profit Margin = NI/Sales
Capital intensity = 1/TA turnover
TA turnover = 1/capital intentisty
Profit margin x TA turnover = ROA
week 4
ROE Dimensions
NI/TE
or du-point
Profitability X
NI/Sales
TA turnover
Sales/TA
X Equity multiplier
TA/TE
FIRM growth
NI
internal growth
b
ROA/1-(b
ROA)
b rentential ratio?
retential earnings / NI
R.E / NI
RE =NI - dev
= 1- DPR
D/E ratio
b
ROE/1-(b
ROE)
dividend payout ratio
dividend / NI
ROE = NI/TE
(1-b) x NI
Dividend paid
X
X
Assets = Liabilities + equity