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CFA - Corporate Finance

  1. Degree of Financial Leverage
    (DFL)
    • % Change EPS
    • % Change EBIT

    Or

    • EBIT
    • EBIT - Interest
  2. Economic Profit
    NOPAT - $WACC

    • NOPAT = EBIT(1-T)
    • $WACC = (Initial Outlay- Depreciation) * WACC
  3. Degree of Operating Leverage
    % Change EBIT / % Change Sales

    or

    Q(P-V) / Q(P-V)-F
  4. Economic Income
    Aftertax CF + (EOP MV - BOP MV)

    Aftertax CF = EBIT(1-T) + Depreciation
  5. Breakeven Quantity Sales
    Fixed Cost / (Price - Variable Cost per unit)
  6. Degree of Total Leverage
    DOL * DFL
  7. Cash Flow (Replacement Project Analysis)
    (Change Sales - Change Cost)(1-T) + Change DT
  8. Initial Outlay (Replacement Project Analysis)
    Outlay = FCInv + NWCInv - Sale + T(Sal - Book)

    • Sal = Cash proceeds of fixed asset to be replaced
    • Book = Book value of fixed asset to be replace
  9. Terminal Year After Tax Non Operating Cash Flow(TNOCF)
    Sal + NWCInv - T(Sale - Book)

    • Sal = Pretax cash proceeds of fixed asset to be replaced
    • Book = Book value of fixed asset to be replace
  10. After tax Operating Cash Flow
    (S - C - D)(1 - T) + D

    or

    (S - C)(1 - T) + TD

    • S = Sales
    • C = Cash operating costs
    • D = Depreciation expense
    • T = Marginal tax rate
  11. Net Working Capital Investment
    (NWCInv)
    Change non cash current assets - Change non debt current liabilities
  12. Initial Outlay
    FCInv + NWCInv
  13. Residual Income
    NI - Equity Charge

    Equity Charge = (Required Return On Equity) * (BOP Book Value of Equity)
  14. Expected Dividend
    Previous Dividend + Expected increase EPS * Target payout ratio * Adjustment factor
  15. Herfindahl Hirschman index
    (HHI)
    Sum i = 1 to n of (MS * 100)2

    • MS = Market share of firm
    • n = # firms in industry
    • <1000 industry is competitive
    • 1000 - 1800 industry moderately competitive
    • >1800 industry not competitive
  16. Market Value Added
    (MVA)
    Sum t=1 to infinity of EP / (1 + WACC)t

    EP = Economic Profit
  17. Post Merger Value
    VAT = VA + VT + S - C

    • VA = Premerger value of acquirer
    • VT = Premerger value of target
    • S = Synergies created
    • C = Cash paid to targets
  18. Take Over Premium
    • (Deal Price/Share - Target's Stock Price)
    • Target's Stock Price
  19. Balance Sheet Based Accruals Ratio
    • (NOAend - NOAbeg)
    • (NOAend + NOAbeg) / 2
  20. Cash Flow Based Accurals Ratio
    • (NI - CFO - CFI)
    • (NOAend + NOAbeg)/2
  21. Core Operating Margin
    • Sales - COGS - SG&A
    • Sales
  22. Gain to Target
    PT - VT
  23. Gain to Acquirer
    S - (PT - VT)
  24. Net Operating Assets (NOA)
    (Total Assets - Cash) - (Total Liabilities - Total Debt)
Author
SpeedRacer
ID
12019
Card Set
CFA - Corporate Finance
Description
CFA Level 2 flashcards
Updated

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