Busy. Please wait.
or

show password
Forgot Password?

Don't have an account?  Sign up 
or

Username is available taken
show password

why


Make sure to remember your password. If you forget it there is no way for StudyStack to send you a reset link. You would need to create a new account.
We do not share your email address with others. It is only used to allow you to reset your password. For details read our Privacy Policy and Terms of Service.


Already a StudyStack user? Log In

Reset Password
Enter the associated with your account, and we'll email you a link to reset your password.

Remove ads
Don't know
Know
remaining cards
Save
0:01
To flip the current card, click it or press the Spacebar key.  To move the current card to one of the three colored boxes, click on the box.  You may also press the UP ARROW key to move the card to the "Know" box, the DOWN ARROW key to move the card to the "Don't know" box, or the RIGHT ARROW key to move the card to the Remaining box.  You may also click on the card displayed in any of the three boxes to bring that card back to the center.

Pass complete!

"Know" box contains:
Time elapsed:
Retries:
restart all cards




share
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.

  Normal Size     Small Size show me how

Corp Finance Midterm

Ratios and Important Equations

QuestionAnswer
Net cash flow Net income - Noncash revenue + Noncash charges OR Net income + Depreciation and amortization
NOPAT (Net Operating Profit After Taxes) The amount of profit a company would generate if it had not debt and held no financial assets. Better measure of performance than Net Income. EBIT(1-tax rate)
NOWC (Net Operating Working Capital) Difference between op current assets and op current liabilities. The working capital acquired with investor-supplied funds. Operating current assets - Operating current liabilities
Total net operating capital Total amount of cap needed to run business NOWC + operating long-term assets
FCF (Free cash flow) Amt of cash flow available to investors NOPAT - Net investment in op cap OR (NOPAT + Dep) - (Net inv in op cap + Dep) OR Operating cash flow - Gross inv in op cap OR Operating cash flow - Gross inv in long-term op assets
Gross investment in operating capital Net investment in operating capital + Depreciation
Operating cash flow NOPAT + Depreciation
ROIC (Return on invested capital) Helps to determine if growth is profitable. If ROIC > rate of return required by investors, then negative FCF is no problem. NOPAT / Operating capital
MVA (Market value added) Difference between market value of stock and equity capital provided Mkt value of stock - Equity cap provided by shareholders OR (Shares outstanding)(Stock price) - Total common equity
EVA (Economic value added) Estimate of management value addNOPAT - after-tax cost of capital used to support ops OR EBIT(1-taxrate) - (Total net op cap)(WACC)
Current Ratio Prime test of liquidity. Creditors generally like it high. Measures extent to which creditors are covered by assets in case of trouble. Current assets / Current liabilities
Quick Ratio, Acid Test Ability of firm to pay off short-term obligations without having to liquidate inventory, which is the least liquid of current assets. (Current assets - Inventories) / Current liabilities
Inventory turnover ratio How many times inventory is cleared and restocked per year. High is good. Sales / Inventory
DSO (Days sales outstanding) Average collection period. Lower the better. Receivables / (Annual sales/365)
Fixed assets turnover ratio How effectively firm uses PPE. Higher the better. Sales / Net fixed assets
Total assets turnover ratio Sales / Total assets
Debt ratio Creditors prefer low (bigger cushion). Stockholders may want high (more leverage = more return). Total liabilities / Total Assets
Debt to equity ratio Version of debt ratio that gives perspective on the non-asset side of the BS. Total liabilities / (Total assets - Total liabilities)
Market debt ratio Reflects risk to future cash flows Total liabilities / (Total liabilities + Market value of equity)
TIE (Times interest earned) Ratio Measures how much operating income can decline before firm will be unable to pay annual interest costs. Higher the better. EBIT / Interest expense
EBITDA coverage ratio Like TIE but accounts for other scheduled payments and full available FCF. EBITDA + Lease payments / (Interest + Principal payments + Lease payments)
Net profit margin Profit per dollar of sales Net Income / Sales
Operating profit margin Shows efficiency of operation without consideration for Int or Taxes EBIT / Sales
Gross profit margin Gross profit per dollar of sales before any expenses are deducted (Sales - COGS) / Sales
BEP (Basic earning power) ratio Earning power of firm before consideration of tax and leverage. Good tool to compare companies with different tax/leverage situations. EBIT / Total assets
ROA (Return on total assets) How much a company earns per dollar of assets Net income available to stockholders / Total assets OR Profit margin * Total assets turnover
ROE (Return on common equity) How effectively management uses funds from equity Net income available to stockholders / Equity OR ROA * Equity multiplier
P/E (Price to Earnings) Ratio How much investors are willing to pay per dollar of profits. Higher the better. Price per share / earnings per share
Book value per share Common equity / Shares outstanding
M/B (Market to Book) Ratio Market price per share / Book value per share
Equity multiplier Helps get ROE from ROA Total assets / Common equity
AFN (Additional funds needed) Required increase in assets - Increase in spontaneous liabilities - Increase in retained earnings
Self-supporting growth rate M(1-POR)(S) over A - L - M(1-POR)(S) M = last year's profit margin POR = last year's payout ratio, net income/sales S = last year's sales A = required increase in assets L = last year's spontaneous assets (payables + accruals)
CCC (Cash conversion cycle) Time from which the product materials are bought, product is made and product is sold. Inventory conversion period + Average collection period - Payables deferral period
Inventory conversion period Time it takes to convert new inventory to cash. Inventory / COGS per day
Payables deferral period Time given by suppliers to pay back Payables / COGS per day
Nominal cost of trade credit Cost incurred by firm using supplier credit (forgoing discounts) instead of bank. Discount % / (100 - discount %) multiplied by 365/ (Days credit is outstanding - discount period)
Approximate annual rate (add on) A method of calculating interest whereby the interest payable is determined at the beginning of a loan and added onto the principal. Interest paid / (Amount received / 2)
Created by: 9212507