Finance 2 Formula Sheets
4
WORKING CAPITAL MANAGEMENT 1. Operating Cycle 2. Cash Conversion Cycle or Inventory Turnover = COGS / (Beginning Inventory + Ending Inventory)/2 Inventory Period =365 days / Inventory Turnover Receivables Turnover = Net Sales / (Beginning Receivables + Ending Receivables)/2 Receivables Period=365 days / Receivables Turnover Payables Turnover = COGS/(Beg. Accounts Payable + End. Accounts Payable)/2 Payable Deferral Period =365 days / Accounts Payable Turnover 3. DuPont ROE 4. Accounts Receivable Management Profit Contribution XXX Add/Deduct: Cost of Marginal A/R XXX Add/Deduct: Effect on Bad Debts XXX Cost of Cash Discount XXX Net Effect on Profit XXX 5. Inventory Management *You need to memorize EOQ, Reorder point, and Safety Stock 6. Payables Management
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For Finance 2
Transcript of Finance 2 Formula Sheets
WORKING CAPITAL MANAGEMENT 1. Operating Cycle 2. Cash Conversion Cycle
or
Inventory Turnover = COGS / (Beginning Inventory + Ending Inventory)/2 Inventory Period =365 days / Inventory Turnover Receivables Turnover = Net Sales / (Beginning Receivables + Ending Receivables)/2 Receivables Period=365 days / Receivables Turnover Payables Turnover = COGS/(Beg. Accounts Payable + End. Accounts Payable)/2 Payable Deferral Period =365 days / Accounts Payable Turnover
3. DuPont ROE 4. Accounts Receivable Management
Profit Contribution XXX Add/Deduct: Cost of Marginal A/R XXX Add/Deduct: Effect on Bad Debts XXX Cost of Cash Discount XXX Net Effect on Profit XXX
5. Inventory Management
*You need to memorize EOQ, Reorder point, and Safety Stock 6. Payables Management
LEASING
Decision Factors – LESSOR:
1. Purchase price of the asset 2. Costs other than maintenance expense 3. Maintenance expense (depends whether the case is OPERATING or FINANCIAL
LEASE) 4. Tax shield on costs (Maintenance and/or other costs x Tax Rate) 5. Tax shield on depreciation expense (Depreciation expense x Tax Rate) 6. Before-‐tax break-‐even point of periodic lease payment to be charged to the
lessee Decision Factors – LESSEE:
1. Purchase price of the asset 2. Loss on depreciation tax shield 3. Lease payments 4. Tax shield on lease payments 5. NPV of the lease, using after-‐tax cost of debt.
Present Value Formula:
Present Value of an Annuity Due Formula:
Cost of Debt Formula: Interest Rate (1 – Tax Rate)
UNDERSTANDING OPTIONS
VALUING OPTIONS
“Go as far as you can see. When you get there, you will be able to see farther.”
