cheat sheet

1、EBITDAMargin(operatingmargin)=EBITDASalesProfitMargin=IncomeSalesGrossProfitMargin=GrossProfitSalesReturnonAssetsBOP=IncomeTotalAssetReturnonInvestedCapital(ROIC)=EBITDAInvestedCapitalROICafterdepreciation=EBITInvestedCa

2、pitalROICafterdepreciationTaxes=EBIT(1Taxrate)InvestedCapitalRateofReturnonEquity=IncomeEquity=NISalesSalesAssetsAssetsEquityAssetTurnover=SalesAssetInventyTurnover=COGSInventyARTurnover=SalesARAPTurnover=COGSAPInventyCo

3、nversionPeriod=365InventyTurnoverARConversionPeriod=365ARTurnoverAPConversionPeriod=365APTurnoverCashConversionCircle=InventyPeriodARPeriod–APPeriodCurrentRatio=CurrentAssetCurrentLiabilityAcidTestQuickRatio=CurrentAsset

4、–InventyCurrentLiabilityCashRatio=CashCurrentLiabilityTimesInterestEarned=EBITInterestDebttoEquity=DebtEquityInvestedCapitalTurnover=SalesInvestedCapitalOperationalFreeCashFlow=FFO–In.inTC–In.inNFADOL=SalesVCSalesVCFCCM$

5、salesCM$sales–FCFinancialFreeCashFlow=InterestDebtRepaymentShareRepurchaseDividendBondCurrentYield=AnnualCouponlastyear’scouponpriceYTM=CurrentYieldCapGains(Capitalgainsisthedifferencebetweenthepriceofbondearningsdividen

6、dsearnings=bROEb=equityfrategrowth=g?ROEbrEb)(1=grD=P???0ROEbrb)(1=EP??0(a)interestratesintheeconomy(b)riskoftheparticularfirminquestion(c)growthThePEratioinequation(8.2)isbasedonexpectedfutureearningsofafirm.Inpracticea

7、PEratioiscalculatedusingthepastyear’searnings.Pastearningscanbepositivenegativezero.TheimplicationofthisobservationisthatthePEratiobecomesunstablewhencurrentearningsapproachzeroundefinedwhencurrentearningsbecomenegative.

8、AcommonuseofPEratiosinthefinancialindustryisfcrude“quickdirty”valuation.Fexampleyoumightknow(frompublishedsecondarysources)thatthePEratiofanindustryis12.5.Inadditionyoumightpredicttheearningsfafirminthisindustrytobe$1.10

9、persharefthenextyear.Acrudeestimateofthevalueofashareinthisfirmis12.5$1.10=$13.75pershare.Themarketcapitalizationrateistherateofreturnthatshareholderscanearnontheirowninfinancialmarketswithfinancialassetsofequalrisk?(Fun