CPA BEC Formulas – Complete Guide
Weighted Average Cost of Capital Right Ans - (Cost of Equity x % Equity in
Cap Structure) + (Weighted Average Cost of Debt x % of Debt in Cap
Structure)
Weighted Average Cost of Debt Right Ans - Effective Annual Interest
Payments / Debt Outstanding
After Tax Cost of Debt Right Ans - Pretax Cost of Debt x (1 - Tax Rate)
Cost of Preferred Stock Right Ans - Preferred Stock Dividends / Net
Proceeds of Preferred Stock
CAPM (Cost of Retained Earnings) Right Ans - Risk-Free Rate + (Beta
Coefficient (Market Return - Risk-Free Rate))
DCF Right Ans - Expected Dividend at the end of One Year / Current Market
Value of the Outstanding Common Stock
BYRP (Cost of Retained Earnings) Right Ans - Pretax Cost of LT-Debt +
Market Risk Premium
Growth Rate Right Ans - Retention Ratio x Return on Investment
Return on Investment Right Ans - Net Income / AVG Invested Capital
Return on Assets Right Ans - Net Income / Assets
Return on Equity (ROE) Right Ans - Net Income / Shareholders Equity
Total Debt to Capital Ratio Right Ans - Total Debt / Total Capital (liabilities
+ equity)
Debt to Equity Ratio Right Ans - Total Debt / Total Equity
Times Interest Earned Ratio Right Ans - EBIT / Interest Expense
Current Ratio Right Ans - Current Assets / Current Liabilities
, Quick Ratio Right Ans - Cash + Marketable Securities + Receivables /
Current Liabilities
Cash Ratio Right Ans - Cash + Cash Equivalents / Current Liabilities
Cash Conversion Cycle Right Ans - Inv Conv. Period + Rec Conv. Period -
Payable Deferral Period
Inventory Conversion Period Right Ans - 365 / Inv. Turnover
Inventory Turnover Right Ans - COGS / Average Inventory
Receivable Conversion Period Right Ans - 365 / AR Turnover
AR Turnover Right Ans - Credit Sales / Average Receivables
Payable Deferral Period Right Ans - 365 / AP Turnover
AP Turnover Right Ans - COGS / Average AP
Working Capital Turnover Right Ans - Sales / Average Working Capital
Working Capital Right Ans - Current Assets - Current Liabilities
Reorder Point Right Ans - Safety Stock + (Lead Time x Sales During Lead
Time)
Economic Order QTY Right Ans - √(2(Annual Sales)(Cost Per PO)
)/(Annual Carrying Cost Per Unit)
APR of Quick PMT Discount Right Ans - (360/Pay Period - Discount Period)
x (Discount / 100 - Discount Amt)
AR Turnover Right Ans - Credit Sales / Avg. AR
Days Sales Outstanding Right Ans - (Avg. AR / Credit Sales) x # of Days in
Period
Weighted Average Cost of Capital Right Ans - (Cost of Equity x % Equity in
Cap Structure) + (Weighted Average Cost of Debt x % of Debt in Cap
Structure)
Weighted Average Cost of Debt Right Ans - Effective Annual Interest
Payments / Debt Outstanding
After Tax Cost of Debt Right Ans - Pretax Cost of Debt x (1 - Tax Rate)
Cost of Preferred Stock Right Ans - Preferred Stock Dividends / Net
Proceeds of Preferred Stock
CAPM (Cost of Retained Earnings) Right Ans - Risk-Free Rate + (Beta
Coefficient (Market Return - Risk-Free Rate))
DCF Right Ans - Expected Dividend at the end of One Year / Current Market
Value of the Outstanding Common Stock
BYRP (Cost of Retained Earnings) Right Ans - Pretax Cost of LT-Debt +
Market Risk Premium
Growth Rate Right Ans - Retention Ratio x Return on Investment
Return on Investment Right Ans - Net Income / AVG Invested Capital
Return on Assets Right Ans - Net Income / Assets
Return on Equity (ROE) Right Ans - Net Income / Shareholders Equity
Total Debt to Capital Ratio Right Ans - Total Debt / Total Capital (liabilities
+ equity)
Debt to Equity Ratio Right Ans - Total Debt / Total Equity
Times Interest Earned Ratio Right Ans - EBIT / Interest Expense
Current Ratio Right Ans - Current Assets / Current Liabilities
, Quick Ratio Right Ans - Cash + Marketable Securities + Receivables /
Current Liabilities
Cash Ratio Right Ans - Cash + Cash Equivalents / Current Liabilities
Cash Conversion Cycle Right Ans - Inv Conv. Period + Rec Conv. Period -
Payable Deferral Period
Inventory Conversion Period Right Ans - 365 / Inv. Turnover
Inventory Turnover Right Ans - COGS / Average Inventory
Receivable Conversion Period Right Ans - 365 / AR Turnover
AR Turnover Right Ans - Credit Sales / Average Receivables
Payable Deferral Period Right Ans - 365 / AP Turnover
AP Turnover Right Ans - COGS / Average AP
Working Capital Turnover Right Ans - Sales / Average Working Capital
Working Capital Right Ans - Current Assets - Current Liabilities
Reorder Point Right Ans - Safety Stock + (Lead Time x Sales During Lead
Time)
Economic Order QTY Right Ans - √(2(Annual Sales)(Cost Per PO)
)/(Annual Carrying Cost Per Unit)
APR of Quick PMT Discount Right Ans - (360/Pay Period - Discount Period)
x (Discount / 100 - Discount Amt)
AR Turnover Right Ans - Credit Sales / Avg. AR
Days Sales Outstanding Right Ans - (Avg. AR / Credit Sales) x # of Days in
Period
