Foundation of Business Finance
Evaluation of Financial Policy
GBA 546
Formula Sheet
Prepared by P. Sarmas
Cash Flow from Assets = Cash Flow to Creditors + Cash Flow to Stockholders
Operating Cash Flow Interest Paid Dividend Paid
- (Net Working Capital - Net New Borrowing - Net New Equity
- Net Capital Spending Cash Flow to Creditors Cash Flow to Stockholders
Cash Flow from Assets
EBIT Ending Net Fixed Assets
+ Depreciation - Beginning Net Fixed Assets
- Taxes + Depreciation .
Operating Cash Flow Net Capital Spending
Ending Net Working Capital (CA – CL)
- Beginning Net Working Capital (CA-CL)
Change in Net Working Capital
Ending L.T. Debt Ending Equity
- Beginning L.T. Debt - Beginning Equity
Net New Borrowing - Addition to Retained Earnings
Net New Equity
Dividend Payout Ratio = Dividends ( Net Income
ROADuPont = Profit Margin * Total Assets t/o
ROEDuPont = Profit Margin * Total Assets t/o * Equity Multiplier
Earnings Retention Ratio = b = 1 – Dividend Payout Ratio = 1- DIV/NI
(1+R) = (1+r)*(1+h)
Operating Cycle = Inventory Period + Accounts Receivable Period
Cash Cycle = Operating Cycle – Accounts Payable Period
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Operating Cash Flow = EBIT + Depreciation – Taxes
Operating Cash Flow = (Sales – OC – Depreciation)*(1-T) + Depreciation
Operating Cash Flow = Net Income + Depreciation
Operating Cash Flow = (Sales – OC)*(1 – T) + T*Depreciation
Book Value of Asset = Original Cost – Accumulated Depreciation
VC = Q*v
TC = VC + FC
NI = (S – FC – VC – D)*(1-T)
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E(Rp) = WA*E(RA) + WB*E(RB)
R = E(R) + U
WACC = WE*RE + WP*RP + WD*RD*(1-tc)
WE + WP + WD = 1
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|Modified Accelerated Cost Recovery System |
| |Property Class |
|Year |3-Year |5-Year |7-Year |
|1 |33.33% |20.00% |14.29% |
|2 |44.44% |32.00% |24.49% |
|3 |14.82% |19.20% |17.49% |
|4 |7.41% |11.52% |12.49% |
|5 | |11.52% |8.93% |
|6 | |5.76% |8.93% |
|7 | | |8.93% |
|8 | | |4.45% |
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DPO = Dividend ÷ Net Income
Dividend Yield = Dividend per share ÷ Price per share
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