1. Chapter 1 & 2 Formulas

Rate of return for an investor

(dividends received + share price appreciation) / initial investment

- For example if the investor provides a company with $10,000 cash by purchasing stock, and sells the shares for $10,600, the share price appreciation is $600.

Net operating cash flows

Cash receipts from customers - Cash disbursements (such as payment of rent, salaries, and utilities)

Book value

Original cost - accumulated depreciation

Retained earnings

Beginning retained earnings +/- correction for prior period adjustments + net income (or - net loss) - dividends declared

Net income

Revenues - expenses

Net operating cash flow (cash basis)

Cash collections - Cash payments

Gross profit

Sales - Cost of goods sold