BSC2 Managerial Finance summary formulas chapter 1, 2,3, 6, 7, 13, 15, 16, 19 and 24

Chapter 2
Bid/ask spread = Ask price – Bid price

Total proceeds = (IPO offer price x # of IPO shares Issued)

Market capitalization = (market price of stock x # of shares of stock outstanding)

IPO underpricing = (market price – offer price) / offer price

Chapter 3
Current ratio = current assets / current liabilities

Quick ratio = current assets – inventory
Current liabilities

Inventory turnover = cost of goods sold / inventory

Average age of inventory = 365 / inventory turnover ratio

Average collection period = accounts receivable
Average sales per day

= accounts receivable
Annual sales
365

Average payment period = accounts payable
Average purchases per day

= accounts payable
Annual purchases
365

Total asset turnover = sales / total assets

Debt ratio = total liabilities / total assets

Debt-to-equity ratio = total liabilities / common stock equity

Times interest earned ratio = earnings before interest and taxes / interest

Fixed-payment coverage = earnings before interest and taxes + lease payments
Interest + lease payments + {(principal payments + preferred stock dividends) x [1/1-T)]}

T = corporate tax rate

Gross profit margin = sales – cost of good sold = gross profit
Sales sales

Operating profit margin = operating profits / sales

Net profit margin = earnings available for common stockholders / sales

, Earnings per share = earnings available for common stockholders
Number of shares of common stock outstanding

ROA = Earnings available for common stockholders / total assets

ROE = earning available for common stockholders / common stock equity

P/E ratio = market price per share of common stock / earnings per share

Book value per share = total common stock equity
Of Common stock number of shares of common stock outstanding

Market/book (M/B) ratio = market price per share of common stock
Book value per share of common stock


Chapter 15
Inventory
AAI = * 365
Cost of goods sold
Accounts receivable
ACP = * 365
Annual sales
Accounts payable
APP = * 365
COGS∨ Annual purc h ases
OC = AAI + ACP

CCC = OC – APP

CCC = AAI + ACP – APP

Order cost = O x (S / Q)

Carrying cost = C x (Q / 2)

Total cost of inventory =[O X (S / Q)] + [C X (Q / 2)]

2X SXO
EOQ =
√ C
S = usage in units per period

O = cost per order

Q = order quantity in units

C = carrying cost per unit per period

Reorder point = days of lead time x daily usage

total variable cost of annual sales
Average investment in accounts receivable =
turnover of accounts receivable
365
Turnover of accounts receivable =
average collection period