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Financial accounting formula sheet with tvm,dcf application, statistics, probability, distribution, estimation and hypothesis testing, economics, accounting, cash flow and ratio.
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Have to know Should know Nice to know Type 4: Difficult formula and probability of being tested is low Content in the curriculum Area under the curve represents the probability of being tested
Quant: DCF Applications
t
365/t
m
Quant: Statistics
⅟n
2
Quant: Distributions, Estimation, Hypothesis Testing
x
n – x
Flatter curve: more elastic Top left: more elastic
GDP based on expenditure approach = Consumer spending on goods and services + Business gross fixed investment + Change in inventories + Government spending on goods and services + Government gross fixed investment + Exports − Imports + Statistical discrepancy GDP based on income approach = National income + Capital consumption allowance + Statistical discrepancy National income = Compensation of employees + Corporate profits before taxes + Interest income + Unincorporated business net income + Rent + Indirect business taxes less subsidies Personal income = National income − Indirect business taxes − Corporate income taxes − Undistributed corporate profits + Transfer payments Personal disposable income = personal income – personal taxes
WL and WC are the relative share of labor and capital in the national income
Potential GDP = Aggregate hours worked x Labor productivity Potential GDP growth rate = Long-term growth rate of labor force + Long-term labor productivity growth rate
Assets = Liability + Equity Equity = Contributed Capital + Retained Earnings Assets = Liability + CC + BRE + Rev – Exp – Div Revenue recognition, Percentage of completion method Installment method: Profit = Cash * Expected Profit as % of Sales Profit = Revenue - Expenses Comprehensive Income = Net Income + OCI
Ending Gross Equipment Balance Gross Cost of Equipment Sold: BB Equipment +Equip. Purchased
Equipment
Historical Cost of Equipment Sold: BB Equipment + Equip. Purchased - EB Equipment Depreciation on Equipment Sold: BB Acc. Depreciation + Dep. Expense - EB Acc. Depreciation Gain on Sale of Equipment
Sale
FIFO and LIFO: use the 1 1 2 2 technique WAC = Total cost of units available for sale / Total units available for sale
FIFO COGS = LIFO COGS – (ending LIFO reserve – beginning LIFO reserve) Carrying amount = historical cost – accumulated depreciation Under IFRS: Impairment loss = Carrying Value – Recoverable amount DTL = (Carrying Amount - Tax Base) x Tax Rate ITE = ITP + Change in DTL – Change in DTA Carrying amount of bond
Capital Budgeting NPV and IRR formulas Profitability index = PV for future cash flows / investment AAR = Average net income/ average book value Cost of Capital WACC = wd rd (1-t) + wp rp + were YTM for cost of debt (IRR) Cost of preferred stock = preferred dividend / share price re = Rf + β [E(Rmkt ) – Rf] re = Rf + β[E(rmkt) – Rf + CRP] P 0 = D 1 / (re- g) and re = D 1 / P 0 + g Breakpoint = amount of capital at which the component cost of capital changes / weight of the component in the capital structure βasset = βequity {1/1+[(1-t) D/E]} and βequity = βasset {1+[(1-t) D/E]}
CF
Current ratio Current assets Current liabilities Quick ratio Cash + M/S + A/R Current liabilities Receivable turnover Credit sales Average receivables Days of receivables 365 Receivable turnover Inventory turnover Cost of goods sold Average inventory Number of days of inventory 365 Inventory turnover Payables turnover Purchases Average payables Days of payables 365 Payables turnover Operating cycle = days of inventory + days of receivables Cash conversion cycle = Net operating cycle = average days of receivables + average days of inventory - average days of payables Yield Formula Discount basis yield (F – P) / F x (360/T) Money market yield (F – P) / P x (360/T) BEY (F – P) / P x (365/T) Line of credit: Banker’s Acceptance: Commercial Paper:
Diversification ratio = Risk of equally weighted portfolio of n securities / Risk of single security selected at random ρ (Ri, Rj) = Cov(Ri, Rj) / σ (Ri) σ (Rj) E(RP) = w 1 R 1 + w 2 R 2 σ^2 (R P) = w 1 (^2) σ 1 (^2) + w 2 (^2) σ 2 (^2) + 2w 1 w 2 ρ^ σ 1 σ 2 Utility of an investment = E(r) – ½ A * σ^2 Market Model: Ri = αi + βRm + ei Beta = Covariance of return on i and the market / Variance of the market return CAPM: re = Rf + β [E(Rmkt) – Rf] Sharpe Ratio = (RP – Rf) / σP Treynor Ratio = (RP – Rf) / βP M^2 = (RP – Rf) σm / σP – (Rm – Rf) Jensen’s Alpha αP = RP – [Rf + β(Rm – Rf)] CML Formula: