Becker BEC Formulas

effective interest rate

interest paid / net proceeds

annual percentage rate

effective interest rate x periods in a year

effective annual rate

((1 + (stated rate / n)) ^n) - 1

simple interest rate

P0 (i)(n)

compound interest rate

P0 (1 + i)^n

risk premium

interest rate risk + liquidity risk + default risk

nominal rate of return

real rate of return + inflation premium

required rate of return

nominal rate of return + risk premium

weighted average cost of capital (WACC)

(E/V)(Re) + (P/V)(Rp) + (D/V)[Rd (1 - T)]

weighted average interest rate

effective annual interest payments / debt outstanding

after-tax cost of debt

pretax cost of debt x (1 - T)

cost of preferred stock

preferred stock dividends / net proceeds of preferred stock

cost of RE (CAPM)

risk free rate + [Beta x (market return - risk free rate)]

market risk premium

market return - risk free rate

cost of RE (DCF)

D1 / P0 + g

cost of RE (BYRP)

pretax cost of long term debt + market risk premium

growth rate (g)

(ROA x retention) / (1 - (ROA x retention))

return on sales

income before interest income & expenses, and taxes / net sales

return on investment

net income / average invested capital

profit margin x investment turnover

return on assets

net income / average total assets

return on equity

net income / average total equity

degree of operating leverage

% change in EBIT / % change in sales

degree of financial leverage

% change in EBT or EPS / % change in EBIT

PV of interest tax savings

(corporate tax rate x debt x cost of debt) / cost of debt

total debt ratio

total liabilities / total assets

debt to equity ratio

total liabilities / total equity

equity multiplier

total assets / total equity

times interest earned ratio

EBIT / interest expense

current ratio

current assets / current liabilities

quick ratio

(cash + short-term marketable securities + receivables) / current liabilities

cash conversion cycle

days in inventory + days sales in AR - days payables outstanding

inventory turnover ratio

COGS / average inventory

days in inventory

ending inventory / (COGS / 365)

AR turnover ratio

net sales / average net receivables

days sales in AR

ending AR (net) / (net sales / 365)

AP turnover ratio

COGS / average AP

days of payables outstanding

ending AP / (COGS / 365)

working capital turnover ratio

sales / average working capital

reorder point

safety stock + (lead time x sales during lead time)

economic order quantity (EOQ)

square root of (2 x annual sales in units x cost per purchase order)/ carrying cost per unit

APR of quick payment discount

(360 / (pay period - discount period)) x (discount / (100 - discount %))

stock value per share

dividend / required return

constant growth DDM

D1 / (r-g)

price to earnings ratio

P0 / E1

peg ratio

(P0 / E1) / G

price to sales ratio

P0 / S1

price to cash flow ratio

P0 / CF1

price to book ratio

P0 / B0

after tax cash flow

pre-tax cash flow x (1 - T)

NPV

the sum of the present values of the future cash flows - the cost of the project

depreciation tax shield *

depreciation x tax rate

profitability index

PV net cash flows / initial investment

payback period

net initial investment / average annual cash flows

prime cost

direct materials + direct labor

conversion cost

direct labor + manufacturing overhead

predetermined overhead rate

traditional estimated total overhead costs / estimated total cost driver

applied overhead

actual cost driver x overhead rate

cost of goods manufactured

beginning work in process + direct materials used + direct labor + factory overhead applied = total manufacturing costs - ending work in process

cost of goods sold

beginning finished goods inventory + cost of goods manufactured = cost of goods available for sale - ending finished goods inventory

equivalent units of production FIFO

1. beginning inventory x (1 - % complete)

2. units completed - beginning WIP

3. ending work in process x % complete

equivalent units of production weighted average

1. units completed

2. ending work in process x % complete

cost per equivalent unit FIFO

current cost only / equivalent units

cost per equivalent unit weighted average

beginning cost + current costs / equivalent units

net profit margin ratio

net income / sales

DuPont ROE

net profit margin x asset turnover x financial leverage

asset turnover ratio

net sales / average total assets

financial leverage ratio

average total assets / average total equity

tax burden

net income / pretax income

interest burden

pretax income / EBIT

operating income margin

EBIT / sales

extended DuPont ROE

tax burden x interest burden x EBIT margin x asset turnover x financial leverage

residual income

net income - required return on equity

required return for residual income

net book value of equity x hurdle rate

economic value added

net operating profit after taxes - required return

required return for economic value added

investment x WACC

total cost

fixed costs + (variable cost/unit x units)

high low method of computing variable costs per unit

change in costs / change in activities

absorption approach

revenue - cogs = gross margin - operating expenses = net income

COGS: DM + DL + VOH + FOGH

OpEx: fixed + variable SGA

direct costing approach

revenue - variable costs = contribution margin - fixed costs = net income

VC: DM + DL + VOH + variable SGA

Fixed Costs: FOH + fixed SGA

contribution margin

sales - variable costs

contribution margin ratio

contribution margin / revenue

breakeven in units

total fixed costs / contribution margin per unit

breakeven in dollars

unit price x breakeven in units

total fixed costs / contribution margin ratio

required sales in units

(fixed costs + pretax profit) / contribution margin per unit

required sales in dollars

variable costs + fixed costs + pretax profits

(fixed costs + pretax profits) / contribution margin ratio

sales price per units

required sales in dollars / units sold

margin of safety in dollars

total sales - breakeven sales

margin of safety percentage

margin of safety in dollars / total sales

target cost

market price - required profit

working capital

current assets - current liabilities

operating cash flow ratio

cash flow from operations / current liabilities

gross margin ratio

(net sales - COGS) / net sales

budgeted production

budgeted sales + desired ending inventory - beginning inventory

number of units to be purchased

units of direct materials needed + desired ending inventory - beginning inventory

cost of direct materials to be purchased

units to be purchased x cost per unit

cost of direct materials used

beginning inventory at cost + purchases at cost - ending inventory at cost

direct labor budget

budgeted production x hours required to produce each unit = total hours needed x hourly rage rate = total wages

cash budget

beginning cash + collections from sales = total cash available - disbursements for purchases and operating expenses = ending cash balance - financing = ending cash

standard direct costs

standard price x standard quantity

standard indirect costs

predetermined application rate x standard quantity