ANGLO-SAXON APPROACH
Sales revenue
- Cost of goods sold
- Selling, general and administrative expenses
= Operating Income
+ Other revenues
-Other expenses (Except Interest)
= EBIT
- Interest payment
= EBT
- Taxes
= Net Income
ROMANIAN APPROACH
Operating revenues
- Operating expenses
= Operating income
Financial revenues
- Financial expenses
= Financial income
Extraordinary revenues
- Extraordinary expenses
= Extraordinary Income
Operating Income
+ Financial Income
+ Extraordinary Income
= EBT
- Corporate Income Tax
= Net Income
Sales revenues = Total operating costs = Total variable costs + Total fixed costs
(P x Q) = TOC = (V x Q) + F
Q
OpBE
= F / (P-V)
S
OpBE
= F/ (1 -(V/P))
Net operating income (NOI = EBIT)
Degree of Operating Leverage:
1% change in Sales => x % change in EBIT
Cash Flow from Operating Activities :
Net Income
+Depreciation & Amortization
- Change in Operating Working Capital (OWC)
= Total Cash from Operations
OWC = [Current assets - Cash & Marketable
Securities] - [Current liabilities - interest
bearing current liabilities]
Cash Flow from Investing Activities :
- Acquisitions of fixed assets
+ Sales of fixed assets
- Acquisitions of financial assets
+ Sales of financial assets
= Cash Flow from Investing Activities
Cash Flow from Financing Activities :
- the amount of long-term or short-term debt
repayed.
+ the amounts of newly issued long-term or
short-term debt.
- total amount of dividends paid.
- the amount of stock repurchases.
+ the amount of new stock issues.
= Cash flow from financing activities.
x
Sales Sales
Sales
Sales
Sales
EBIT
EBIT
L
OPBE
o
=
=
A
A
=
0
0
0
0
New Working Capital (NWC) = OwnersEquity + Long Term Debt - Fixed Assets
NWC = Current Assets Current Liabilities
Inventory Conversion Period (ICP) = inventory
0
/cogs
1
x 365 days = x days
Receivables Collection Period (RCP) = acc receiv
0
/sales
1
x 365 days = x days
Payables Period (PP) = accounts payable
0
/COGS
1
x 365 days = x days
Cash conversion cycle (CCC) = ICP + RCP PP
Operating Cycle (OC) = ICP + RCP
Nominal trade credit cost formula:
period Disc. - taken Days
days 365
% Discount - 1
% Discount
k
TC
=
Net value = gross value depreciation
Current ratio = current assets / current liabilities
Quick ratio (acid test) = (cash + marketable securities + accounts receivables) / current liabilities
Cash ratio = (cash + marketable securities) / current liabilities
Acc Receiv Turnover Ratio = net credit sales / average accounts receivable
Fixed asset turnover = sales / fixed assets
Total assets turnover = Sales / Total assets
Inventory turnover = COGS / average inventory
Gross margin ratio = Gross margin/ sales
Operating margin ratio = EBIT / sales
Net profit margin = net income / sales
Cash Flow margin ratio = Cash-flow from operating activity/ sales.
ROE = net income / shareholders equity
ROA = net income / average total assets
Return on invested capital (ROIC) = (Net income + Interest)/(L-T Debt + Equity)
L-T Debt + Equity = Net Assets or Operating Capital
ROE = ROIC + [(ROIC Cost of debt)L-T Debt/Equity]
Debt-equity ratio = total debt / equity
Long-term debt ratio = long-term debt / ( long-term debt + equity)
Total debt ratio = total liabilities / total assets
Times interest earned = EBIT / interest expense
Times Cash flow coverage = (OCF + Tax + Interest Exp) / interest expense
Times burden covered = EBIT/(Interest + Principal repayment/(1-t))
P/E Ratio = ratio of market price per share to earnings per share
Market/Book Ratio = Market price per share / Book value per share
Price/Cash Flow
Dividend yield = Dividend per share of common stock Market price per share of common stock
Compund interest: FV = PV + (PV x Interest)
Future Value: FV
1
= PV (1+k)
n
FV = future value
PV = present value or principle
k = rate of interest per compounding period
n = number of compounding periods
Frequency of comp: FV
n
= PV
0
(1 + [k/m])
mn
n: Number of Years
m: Compounding Periods per Year
k: Annual Interest Rate
FV
n,m
: FV at the end of Year n
PV
0
: PV of the Cash Flow today
FV = PV(1 + k)
t
=> PV = FV / (1 + k)
t
1 -
m
k
+ 1 = EAR
m
SIMPLE
|
.
|
\
|
n m
SIMPLE
n
m
k
+ 1 PV = FV
|
.
|
\
|
(
+
=
(
+ =
=
k
1 k) (1
PMT k) (1 PMT FVA
n 1 n
0 t
t
n
(
(
=
(
+
=
+
=
k
- 1
PMT
k) (1
1
PMT PVA
n
k) (1
1
n
1 t
t n
g k
PMT
PVA
n
=
1
PVA
n
= PMT/k
NPV = - I
0
EXPECTED PROJECT RETURN = r
f
+ b
project
(r
m
- r
f
)
Profitability index
Internal rate of return (IRR)
X (1+0,01)
60
+ X (1+0,01)
59
+ . X (1+0,01) = 100.000
X (1+0,01) ((1+0,01)
59
+ 1+0,01)
58
+ . + 1) = 100.000
(geometric progression)
Ration q = (1+0,01)
S = a
1
x (q
n+1
1)/q-1
S= 1 x (1+0,01)
60
1/ (1+0,01) 1
WACC = K
e
* OE/K
inv
+ K
d
* (1- tau) * LTD/ K
inv
K
inv
= OE + LTD
OE/K
inv
+ LTD/ K
inv
= 1
n 2
) (1 ) (1 ) (1
.......
k
TV FCFF
k
FCFF
k
FCFF n n 2 1
+ + +
+
+ + +
rate inflation + 1
rate interest nominal + 1
= rate interest real 1 +
( ) ( )
0
1
1 1
I
k
TV
k
CF
NPV
n t
t
n
t
+
+
+
=
=
0
) (
I
CF PV
PI =
( ) ( )
n t
t
n
t
IRR
TV
IRR
CF
I
+
+
+
=
=
1 1
1
0
factor annuity
costs of lue present va
= cost annual Equivalent