TIME VALUE OF MONEY

PRESENT VALUE:

Amount * PVIF

PVIF: 1/ (1+r) n

PVIF Annuity Ordinary: 1-1/ (1+r) n /r

PVIF Annuity Due: 1-1/ (1+r) n /r * (1+r)

FUTURE VALUE:

Amount * FVIF

FVIF: (1+r) n

FVIF Annuity Ordinary: (1+r) n -1 /r

FVIF Annuity Due: (1+r) n -1 /r * (1+r)

BOND VALUATION

CASH FLOW

Phase value * Interest Rate = Cash flow

Cash Flow * PVIF = PV

PREFERRED STOCK

Expected Dividend (D1) / r

Situation of common stock

 Constant Dividend: Expected Dividend (D1) / r

 Growth Constant Dividend: D1 / r – g
 Abnormal Growth Dividend: Time Line Table

FINANCIAL ANALYSIS

1. CURRENT RATIO: Current Asset / Current Liabilities

2. QUICK RATIO: Current Asset – Inventory / Current Liabilities
3. CASH RATIO: Cash / Current Liabilities
4. NET PROFIT MARGIN: Net Income / Net Sales
 5. RETURN ON ASET RATION: Net Income / Avg. Total Asset
6. RETURN ON EQUITY: Net Income / Avg. Total Shares Holder Equity
T.A – T.L = Share Holder Equity
7. INVENTORY TURN OVER: COGS / Avg. Inventory (Finished Goods)
8. A/C RECEIVABLE TURNOVER: Net Credit Sales / Avg. A/c Receivable
9. TOTAL ASSET TURNOVER RATIO: Net Sales / Avg. Total Asset
10. TIME INTREST EARNED RATIO: Income B4 Interest and Taxes (EBIT) / Interest Expense
EBIT: Gross Profit – Distribution Exp. – Administrative Exp. – Other Operating Exp
11. DEBT RATIO: TOTAL LIABILITIES / TOTAL ASETS
12. DEBT-EQUITY RATIO: Total Liabilities / Total Share Holder Equity
13. EARNING PER SHARES: Net Income / No. of Shares Outstanding
Treasury Stock – Issue Shares = Outstanding Shares
14. PRICE EARNING RATIO: Market Price / EPS
15. DIVIDEND YEILD RATIO: Dividend Per Share / Market Price

FINANCIAL FORECASTING AND PLANNING

Within Capacity

Current Asset (xxx * rate) xxx

Less: A/c Payable (xxx * rate) (xxx)

Net Increase Current Asset xxx

Net Income (xxx * Rate = xxx + N.I = xxx)

Profit Margin (Net Income * Rate) xxx

Less: Dividend Payoff Ratio (Profit Margin * Rate) (xxx) (xxx)

Within Capacity xxx

ABOVE CAPACITY

Fixed Asset (xxx * rate) xxx

Add: Net Increase Current Asset xxx

Net Income Total Asset xxx

Less: Net Profit Margin (xxx)

Additional Fund Needed (AFN) xxx

WORKING CAPITAL

Total Current Asset – Total Current Liabilities = Working Capital

Three Approaches

1. Aggressive ---------------- Short term Finance

2. Conservative-------------- Long Term Finance
3. Moderate---------- Permanent Part from Long Term and Temporary part from Short term

CASH MANAGEMENT AND MARKETABLE SECURITIES

Daily Collection * Net Float * Interest Rate

ACCOUNT RECEIVABLE MANAGEMENT

Contribution Margin

Less: Cost (Bed Debts, Opportunity Cost, Cost of Collection and Discount)

INVENTORY MANAGEMENT

1. EOQ = √2*AD*OC / CC
2. No. of Orders = Annual Demand / EOQ
3. Avg. Inventory= EOQ/ 2
4. Total Ordering Cost= No. of Order * OC
5. Total Carrying Cost= Avg. Inventory * CC
6. Total Cost of Inventory= Total Ordering Cost * Total Carrying Cost
 CAPITAL BUGETING

Evaluation Techniques

1. Accounting Rate of Return= Avg. Annual Profit / Initial Investment

2. Payback Period= Year , Cash flow – Cumulative Cash flow
3. Discounted Payback Period= Year, cash flow, PVIF at x%, PV – Cumulative Cash flow
4. Net Present Value= Present Value of all years – Initial Investment
 NPV Index= NPV/ Initial Investment
5. Internal Rate of Return= B+[PNPV/ PNPV- (-NNPV) * A-B]

CASH FLOW PROJECTED

Year

SALES

Less: V.C

C.M

Less: F.C AND DEPRICIATION

PROFIT BEFORE TAX

LESS: TAX

NET INCOME

ADD: DEPRICIATION

CASHFLOW AFTER TAX

INCREMENTAL CASH FLOW

Same as Above