Cfp - Financial Math

Front 1

Nominal Rate of Return

Back 1

Nominal Rate = (1+Real Rate)(1+Inflation) - 1

Front 2

Real Rate of Return (RROR)

Back 2

RROR = (Nominal Rate - Inflation Rate) / (1+Inflation Rate)

Front 3

Marginal Tax Rate (MTR)

Back 3

The rate of tax applied to the next dollar earned

Front 4

Average Tax Rate (ATR)

Back 4

ATR = Total Tax Owed / Total Income

Front 5

After Tax Rate of Return (ATROR)

Back 5

ATROR = (Nominal Interest Rate)*(1-MTR)

Front 6

Real After-Tax Rate of Return

Back 6

ATROR = [Nominal Return * (1-MTR) - expected inflation] / (1+expected inflation)

Front 7

Current Yield (CY) for Stocks

Back 7

CY = (Dividend / Current Market Price) * 100

Front 8

Yield to Maturity (YTM)

Back 8

1. Total return for a bond

2. YTM = [Coupon + (1000-Market Price)/n] / [(1000+ Market Price)/2]

Front 9

Clean Price of a Bond

Back 9

Bond Price = PV (Cash Flows) + PV (Maturity Value)

Front 10

Full Price (Dirty Price) of a Bond

Back 10

1. If a bond has been purchased on a date that is not a coupon payment date, the dirty price is the interest accrued and the purchase price of a bond to the seller

2. Dirty Price = Clean Price + Accrued Interest

Front 11

Clean Price

Back 11

Price of a bond excluding the accrued interest

Front 12

Accrued Interest

Back 12

Accrued Interest = Coupon Rate * Par Amount * (# of days/365)

Front 13

Weighted Mean

Back 13

Weighted Mean = [(wn*xn)/N]

Front 14

TWRR / Geometric Mean

Back 14

TWRR = [(1+R1)(1+R2)(1+R3)...(1+Rn)]^(1/n) - 1

Front 15

Holding Period Return (HPR)

Back 15

1. The growth or difference between the ending value and the beginning value of an investment over a specific period of time

2. HPR % = [[Income + (End Value - Beg Value)] / Beg Value] * 100

Front 16

Holding Period Return (HPR) (Annual)

Back 16

HPR % (Annual) = HPR% * (365/# of days)

Front 17

Total Return for a Stock

Back 17

Total Return for a Stock = Dividend Yield + Growth

Front 18

T-Bill Yield

Back 18

T-Bill Yield = [(Par Value - Price Paid)/Price Paid] * (365/# of days)

Front 19

ACB (for Mutual Funds)

Back 19

ACB = Purchase Price + Commissions

Front 20

Price Paid / NAVPS (No Load)

Back 20

NAVPS = (Total Assets - Liabilities) / # of Shares Outstanding

Front 21

Price Paid (Front-End Load)

Back 21

Price Paid = NAVPS / (1-%Sales Charge)

Front 22

Price Received (DSC)

Back 22

Price Received = NAVPS * (1-%Redemption Fee)

Front 23

Distribution Equations

Back 23

1) Opening Value = NAVPS * # Units

2) # New Units = (Distribution * # Units) / NAVPS

Front 24

Total Return (TR)

Back 24

1. Represents the difference between the beginning fund value at the ending fund value including any distributions

2. TR = [(Final NAV + Distributions - Original Nav) / Original Nav] * 100

Front 25

Current Ratio (CR)

Back 25

1. How quickly a company can meet and handle its short term obligations

2. CR = Current Assets / Current Liabilities

Front 26

Quick Ratio (QR)

Back 26

QR = (Current Assets - Inventory) / Current Liabilities

Front 27

Debt-to-equity Ratio (DTER)

Back 27

1. Determines the level of riskiness of the company. The higher the debt, the greater the financial risk.

2. DER = Total Debt / Shareholders' Equity

Front 28

Debt-to-assets Ratio (DTAR)

Back 28

DTAR = (Total Debt/Total Assets) * 100

Front 29

Interest Coverage ("times interest earned")

Back 29

Interest Coverage = EBIT / Interest Expense

Front 30

Net Profit Margin (NPM)

Back 30

1. Management's ability to manage the various business expense and turn a profit

2. NPM = (Net Profit / Sales) * 100

Front 31

Gross Profit Margin (GPM)

Back 31

1. GPM = (Gross Profit / Sales) * 100

2. Gross Profit = Sales - COGS

Front 32

Return on Common Equity (ROCE)

Back 32

1. Management's ability to use its assets to generate profits

2. ROCE = [(Net Income - Preferred Dividends) / (Net Worth - Preferred Shares)] * 100

Front 33

Return on Total Assets (ROTA)

Back 33

ROTA = (Net Income / Total Assets) * 100

Front 34

Earnings Per Common Share (EPS)

Back 34

1. Used to calculate the intrinsic value of a share

2. EPS = (Net Income - Preferred Dividends) / Average # of Common Shares Outstanding

Front 35

Price to Earnings (P/E) Ratio

Back 35

P/E = Current Market Price of Common Shares / EPS

Front 36

Dividend Payout

Back 36

1. Indicates the percentage of a company's earnings that are paid out to shareholders as dividends

2. Dividend Payout = Dividends per Share / EPS

Front 37

Market Capitalization

Back 37

Market Capitalization = # of shares outstanding * share price

Front 38

Asset Turnover (ATR)

Back 38

1. Management's ability to effectively utilize the assets to generate sales

2. ATR = Sales / Total Assets

Front 39

Inventory Turnover (IT)

Back 39

IT = COGS / Closing Inventory

Front 40

Receivable Turnover (RT)

Back 40

RT = Credit Sales / Closing Accounts Receivable

Front 41

Dividend Discount Model (DDM)

Back 41

Ps = D1 / (r-g)

Front 42

Growth Rate (for DDM)

Back 42

G = (1-Dividend Payout) (Expected Return)

Front 43

P/E Ratio for DDM

Back 43

P/E = Dividend Payout / (r-g)

Front 44

Dividend Payout for DDM)

Back 44

Dividend Payout = Dividends / Earnings

Front 45

Factors that affect P/E Ratios

Back 45

1) The higher the expected dividend payout, the higher the P/E ratio and vice versa

2) The higher the expected dividend growth rate, the higher the P/E ratio and vice versa

3) The higher the expected required return, the lower the P/E ratio and vice versa

4) The higher the expected interest rate, the lower the P/E ratio and vice versa

5) The higher the expected inflation rate, the lower the P/E ratio and vice versa

Front 46

Conversion Premium

Back 46

CP = Market Price of a Bond - Conversion Value