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28 Cards in this Set
- Front
- Back
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Return on Investment Formula(ROI)
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Margin x Turnover
(Net Operating Income / Sales) x (Sales / Average Operating Assets) |
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3 things that increase ROI
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1. Increase in Sales
2. Reduce Expenses 3. Reduce Assets |
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Income Statement Forula
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Sales
<COGS> = Gross Profit <Selling, Administrative, Taxes> =Net Operating Income |
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Residual income Formula (RI)
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Net Operating Income-(Average Operating Assets x Minimum Required Rate of Return)
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Transfer Prices
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Price charged when one segment of a company provides goods or services to another segment of the company
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3 different approaches to transfer prices
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1. Negotiated transfer prices
2. Transfers @ cost of the selling division 3. Transfers @ market cost |
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Relevant Costs
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differs between alternatives (A Vs. B)
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Unavoidable Costs
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Sunk costs, future costs that don't differ between alternates
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If I want to know how much $100 will be worth in 2 years at 8% what to I do?
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multiply 100 by 1.08 twice
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If I want to know how much $100 was worth 2 YEARS PRIOR at 12% what do I do? (Or I need $100 in two years and want to know how much I should invest at 12%)
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Look at the PV of $1 chart.
100 x .797 (from chart)=79.70 |
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If I need to spend 60K for a budget each year for the next 5 years, and I'll make 12%, how much do I need to initially invest in order to have a balance of zero at the end of year 5? (which chart do I look at)
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Chart= Present Value of an Annuity of $1 in Arrears.
60000 x 3.605(from chart)=216,300 (what I need to start out with) |
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Net Present Value (NPV)
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amount of cash flow (or savings) x number from PV of an Annuity chart = NUMBER - current amount of cash flow.
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NPV levels
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if at 0= life is good
if greater than 0= life is really good if less than 0= life is bad |
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Internal Rate of Return (IRR)
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Price of new project / amount of savings/revenue= NUMBER go to PV of an Annuity chart to find % and number of years
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Payback Method
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Investment Required / Net annual cash inflow = number of years
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Simple Rate of Return
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(Incremented Revenue - Incremental Expenses) / Initital Investment
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Horizontal/Comparative Analysis
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(New Number / Old Number) - 1
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Gross margin Percentage
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Gross Margin(Profit) / Sales
(Get Gross Profit from Sales<COGS>=Gross Profit |
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Earnings Per Share
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Net Income - Preffered Dividends / Average Number of Common shares outstanding
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Price-Earings Ratio (PE Ratio)
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Market Price Per Share / Earnings Per Share
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Dividend Payout Ratio
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Dividends Per Share / Earnigns Per Share
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Dividend Yield Ratio
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Dividends Per Share / Market Price Per Share
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Return on Assets (ROA)
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{Net Income + [Interest Expense x (1-Tax Rate)]} / Average Total Assets
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Return on Equity
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(Net Income - Preffered Dividends) / Stock holders Equity
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Current Ratio
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Current Assets / Current Liabilities
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Debt to Equity
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Total Liabilities / Stockholders Equity
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Some things that are current assets
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cash, AR, Inventory, Prepaid Expenses,
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Book Value Per share
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Common stockholders equity / Number of common shares outstanding
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