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financial formulas

  1. Aggressive financing Plan
    • High Risk/Profit
    • Low Liquidity/Short term financing
  2. Conservitive Financing Plan
    • Low Profit/Risk
    • Long Term financing/High Liquidity
  3. Moderate financing plan
    • Moderate Profit/Risk
    • Short term financing with High Liquidity
    • or
    • Long term financing with Low Liquidity
  4. % of Working Capital
    • (current assets - Current Liabilities)
    • divided by
    • Sales
  5. Cost of failing to take cash discount
    • Discount %/(100% - discount %)
    • times
    • 360/ (final due date - discount period)
  6. Effective Rate Reg Loan
    • interest/principal
    • times
    • days in the year (360)/ days outstanding on loan
  7. Effective Rate Discount Loan
    • interest/(principal - interest)
    • times
    • days in the year(360)/days outstanding
  8. Effective rate w/ compensating balance (given rate)
    stated rate/(1-% compensating balance)
  9. Effective rate with compensating balance (given $$ amounts)
    • interest/(principal - compensating balance in $)
    • times
    • year (360)/days loan outstanding
  10. effecitve rate on installment loans
    • (2 X annual # of payments X interest)
    • divided by
    • (total # of payments +1) times principle
  11. Ratio of bad debt to credit sales
    $ of bad debt loss/$ of credit sales
  12. sales to ar turnover
    sales/turnover
  13. ROI for credit decision
    • I is AR so
    • net income/ AR
  14. Economic Order Quantity (EOQ)
    • sqrt ((2*S*O)/C)
    • S is sales in units
    • O is ordering cost
    • C is carrying cost per units
  15. Average Inventory
    EOQ/2
  16. Average inventory with safety stock
    (EOQ)/2 + Safety stock
  17. Total cost for inventory
    • Order costs = units sold/order size
    • Carrying cost - Avg inv in units X carrying cost per unit
    • order cost + carrying cost
  18. future value - single amount
    • FV = PV X FVif
    • FV = PV X (1+i)^n

    table future value of $1
  19. present value - single amount
    • PV=FV X PVif
    • PV = FV X (1/(1+i)^n)

    table present value of $1
  20. future value - annuity
    • FVa=A(FVifa)
    • FVa = A[((1+i)^n-1)/i]

    future value of annuity
  21. Present value - annuity
    • PVa=A(PVifa)
    • PVa = A[(1-(1/(1+i)^n)/i]

    table present value of annuity
  22. annuity equaling a future amount
    • A = FVa/((1+i)^n-1)i)
    • A = FVa/FVifa

    table future value of annutiy
  23. annuity equaling a present value
    • A=PVa/(1-(1/(1+i)^n))/i
    • A=PVa/PVifa

    table present value of annuity
  24. how to figure annuity when more than one payment/investment in a year
    • n = number of years X # of compunding periods per year
    • i = annual interest rate/# of compounding periods in a year
Author
wsrdpc
ID
82315
Card Set
financial formulas
Description
exam 2 formulas
Updated

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