Term
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Definition
Sum of discounted cash flows - Initial Cash Outlay
∑[CFt / (1 + r)t] - Outlay |
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Term
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Definition
Discount rate that equates the cash flows with the initial cash outlay
∑[CFt / (1 + IRR)t] = Outlay |
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Term
| Average Accounting Rate of Return (AAR) |
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Definition
| Average Net Income / Average Book Value |
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Term
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Definition
| PV of Future Cash flows / Initial Investment or 1 + [NPV / Initial Investment] |
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Term
| Weighted Average Cost of Capital |
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Definition
WACC = [(wd)(rd)(1 - t)] + [(wp)(rp)] + [(wc)(rc)]
p = preferred stock
c = common equity
d = debt |
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Term
| Transforming Debt-to-Equity Ratio into a components weight |
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Definition
| [D/E] / [1 + (D/E)] = D / [D + E] = wd |
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Term
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Definition
| Sum of PV of Payments + PV of Principal repayments |
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Term
| Valuation of Preferred Stock |
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Definition
vp = Dp/rp
v = value
D = dividend
r = cost of preferred stock |
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Term
| Measures of Required Return on a Stock |
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Definition
CAPM
Dividend Discount Model |
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Term
| Capital Asset Pricing Model |
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Definition
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Term
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Definition
P0 = D1 / [rc - g]
g = expected constant growth rate of dividends
rc = required rate of return on common equity
Rearranges to: rc = [D1 / P0] + g |
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Term
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Definition
g = [1 - (D/EPS)] * ROE [
1 - (D/EPS)] aka Earnings Retention Rate (1 - div payout ratio) |
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Term
| Bond Yield Plus risk premium approach |
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Definition
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Term
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Definition
| βAsset = βEquity * [1 / (1 + (1-t)*(D/E))] |
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Term
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Definition
| βProject = βAsset * [1 + ((1-t)*(D/E))] |
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Term
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Definition
rc = Rf + β[E(RM) - RF + CRP]
or
Sovereign yield spread * (Annualized SD of equity index / Annualized SD of Sovereign bond market in terms of the developed market currency) |
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Term
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Definition
| Amount of capital at which a component's cost of capital changes / proportion of new capital raised from the component |
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Term
| Degree of Operating Leverage |
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Definition
| DOL = Percent Change in Operating Income / Percent change in units sold |
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Term
| Degree of Operating Leverage Formula |
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Definition
[Q * (P - V)] / [(Q * (P - V)) - F]
Q = number of units sold
P = Price per unit
V = Variable operating cost per unit
F = Fixed operating cost
Q * (P - V) = Contribution Margin (amount that units sold contribute to covering fixed costs |
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Term
| Degree of Financial Leverage |
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Definition
| DFL = Percentage Change in Net Income / Percentage Change in Operating Income |
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Term
| Degree of Financial Leverage Formula |
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Definition
DFL = [Q(P - V) - F] / [Q(P - V) - F - C]
Q = number of units sold
P = Price per unit
V = Variable operating cost per unit
F = Fixed operating cost
C = Fixed financial cost |
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Term
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Definition
| Percentage Change in Net Income / Percentage Change in the Number of Units Sold |
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Term
| Degree of Total Leverage Formula |
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Definition
DTL = DOL * DFL
DTL = [Q * (P - V)] / [Q * (P - V) - F - C] |
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Term
|
Definition
PQ = VQ + F + C
P = Price per unit
Q = Number of units produced and sold
V = Variable cost per unit
F = Fixed operating costs
C = Fixed financial costs
QBE = (F + C) / (P - V) |
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Term
| Operating Break Even Point |
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Definition
PQOBE = PV + F
QOBE = F / (P - V)
P = Price per unit
Q = Number of units produced and sold
V = Variable cost per unit
F = Fixed operating costs |
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Term
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Definition
| Current Assets / Current Liabilities |
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Term
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Definition
| (Cash + Short term marketable investments + receivables) / Current Liabilities |
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Term
| Accounts Receivable Turnover (CorpFin) |
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Definition
| Credit Sales / Average Recievables |
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Term
| Number of Days of Receivables (CorpFin) |
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Definition
Accounts Receivable / Average Days Sales on credit
Accounts Receivable / [Sales on Credit / 365] |
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Term
| Inventory Turnover (CorpFin) |
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Definition
| Cost of Goods Sold / Average Inventory |
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Term
| Number of Days of Inventory (CorpFin) |
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Definition
Inventory / Average day's COGS
Inventory / [COGS / 365] |
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Term
| Payables Turnover (CorpFin) |
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Definition
| Purchases / Average Trade Payables |
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Term
| Number of Days of Payables (CorpFin) |
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Definition
Accounts payables / Average day's purchases
Accounts payables / [Purchases / 365] |
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Term
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Definition
| Ending Inventory + COGS - Ending Inventory |
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Term
| Operating Cycle (CorpFin) |
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Definition
Number of Days of Inventory + Number of Days of recievables
[Inventory / [COGS / 365]] + [Accounts Receivable / [Sales on Credit / 365]] |
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Term
| Net Operating Cycle (CorpFin) |
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Definition
| Number of days of inventory + number of days of receivables - number of days of payables |
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Term
| Money Market Yield (CorpFin) |
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Definition
[(Face value - price) / Price] * [360 / Days]
HPY * [360 / Days] |
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Term
| Bond Equivalent Yield (CorpFin) |
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Definition
[(Face value - price) / Price] * (365/Days)
HPY * (365/Days) |
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Term
| Discount Basis Yield (CorpFin) |
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Definition
[(Face value - price) / Face Value] * (360/Days)
% Discount * (360/Days) |
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Term
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Definition
| [Face value - price] / Price |
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Term
| Inventory Turnover (CorpFin) |
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Definition
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Term
| Cost of Trade Credit (aka Implicit Rate) |
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Definition
[1 + (Discount / (1 - Discount))][365 / Days beyond discount period] - 1
Not sure if -1 is raised up or not |
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Term
|
Definition
| (Interest + Commitment fee) / Loan amount |
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Term
|
Definition
Interest / Net proceeds
Interests / (Loan amount - Interest) |
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