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FM Formula Sheet v4.0

The document is a financial management formula sheet that outlines key formulas for financial statement analysis, net working capital, cash flow, liquidity ratios, financial leverage ratios, asset management ratios, and market value ratios. It also covers long-term financial planning concepts such as dividend payout and retention ratios, as well as capital budgeting techniques including NPV, IRR, and profitability index. Additionally, it provides formulas for bond valuation and stock pricing based on dividends and growth rates.

Uploaded by

Paige Evans
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
33 views4 pages

FM Formula Sheet v4.0

The document is a financial management formula sheet that outlines key formulas for financial statement analysis, net working capital, cash flow, liquidity ratios, financial leverage ratios, asset management ratios, and market value ratios. It also covers long-term financial planning concepts such as dividend payout and retention ratios, as well as capital budgeting techniques including NPV, IRR, and profitability index. Additionally, it provides formulas for bond valuation and stock pricing based on dividends and growth rates.

Uploaded by

Paige Evans
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Financial Management

Formula Sheet

3 – Financial Statement Analysis

German Corporate Tax

Corporate Tax = 0.15 x EBT


Trade Tax = TCR / 100 x MCR / 100 x EBT
Solidarity Surcharge = 0.055 x Corporate Tax

Net Working Capital

NWC = Current Assets (CA) – Current Liabilities (CL)

Cash Flow

OCF = EBIT – Taxes + Depreciation


NCS/CAPEX = Ending Net Fixed Assets – Beginning Net Fixed Assets +
Depreciation
CFFA/FCF = Operating Cash Flow – Net Capital Spending – Changes in NWC
EBITD = EBIT + Depreciation
EBITDA = EBIT + Depreciation + Amortization

Liquidity Ratios

Current Ratio = CA / CL
Quick Ratio = (CA – Inventory) / CL
Cash Ratio = Cash / CL

Financial Leverage Ratios

Times Interest Earned = EBIT / Interest


Cash Coverage Ratio = (EBIT + Depreciation) / Interest

Financial Management 1
Financial Management

Asset Management Ratios

Inventory Turnover = Cost of Goods Sold / Inventory


Days’ Sales in Inventory = 365 / Inventory Turnover
Receivables Turnover = Sales / Accounts Receivable
Days’ Sales in Receivables = 365 / Receivables Turnover
Total Asset Turnover (TAT) = Sales / Total Assets

DuPont Identity
Return on Equity (ROE) = PM x TAT x EM

Market Value Ratios

Earnings per Share = Net Income / Shares Outstanding


Price-Earnings Ratio = Price per Share / Earnings per Share
Market-to-Book Ratio = Market Value per Share / Book Value per Share
Book Value per Share = Total Equity / Shares Outstanding

4 – Long-Term Financial Planning

Dividend Payout Ratio

d = Dividends / Net Income

Retention Ratio

b = Addition to Retained Earnings / Net Income

External Financing Needed


EFN = Asset × g − Trade  payable × g − (1 − d )(1 + g ) × NI

ROA × b
Internal    Growth    Rate =
1 -­‐ ROA × b

ROE × b
Sustainable    Growth    Rate =
1 -­‐ ROE × b

Financial Management 2
Financial Management

6 – Capital Budgeting

Net Present Value


If cash flows are constant, C1= C2=…= C then
Ci T
NPV = −C0 + ∑ T
Ci #1− v T & 1
i =1 (1 + r )
i
∑ (1+ r)i = C % r ( !!!!!!!!!!where!!v = 1+ r
i=1 $ '

Discounted Payback Period x


x x
Ci Ci
∑ (1+ r) i
≥ C0 !!!!!!!!!or!!!!!!!! - C0 + ∑ i
≥0
i=1 i=1 (1+ r)

Internal Rate of Return

NPV1 x r2 - NPV2 x r1
IRR =
NPV1 - NPV2

Profitability Index
T
Ci
∑ (1 + r )
i =1
i
PI =
C0

7 – Interest Rates and Bond Valuation

General Pricing Formula


T
Ci F
Bond Value =∑ i
+
i=1 (1+ r) (1+ r)T

Bond Value of Zero Coupon Bond


F
Bond Value =
(1 + r )T

Financial Management 3
Financial Management

Bond Value of Fixed-rate Bond


# 1− ν T & T
Bond Value = C ⋅ % ( + F ⋅ν
$ r '
1
where ν =
1+ r

Bond Value of Consol


C
Bond Value =
r

8 – Equity Markets and Stock Valuation

Price today of a share


D1 D2 D3
P0 = 1
+ 2
+ + ...
(1 + R) (1 + R) (1 + R) 3

Constant Dividend
D
P0 =
R

Dividend Growth
D1 D (1+ g)
P0 = = 0
R−g R−g

Required Rate of Return


R = (D1 / P0 ) + g

Financial Management 4

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