Basic Finance Equations

Return on Assets ROA=asset turnover X profit margin
Return on Equity ROE=(assets/equity) X asset turnover X profit margin X debt burden
Future Value FV=(1+r)^tt=years, r=interest rate
Present Value PV=1/(1+r)^t
Annuity PV PV= (1/r) – 1/r(1+r)^t
Annuity FV FV=[(1+r)^t -1]/r
Effective Annual Rate EAR=[1 + (APR/m)]^m – 1m=compounding periods per year
Real Value of CF Real Value of CF at time t=nominal CF/(1+inflation rate)^t
Real interest rate Real Interest Rate=[(1+nominal rate)/(1+inflation rate)]-1 ~~nominal rate-inflation rate
Market Value Added =market value of equity-book value of equity
Market-to-Book Ratio =market value of equity/book value of equity
ROA ROA=(NI+interest)/total assets
Return on Capital ROC=(NI+interest)/(Long-term debt+ Equity)
EVA EVANI-cost of equityXequity
Operating Profit Margin OPM=(NI+interest)/sales
Asset Turnover sales/total beginning assets
Inventory Turnover CoGS/beginning inventory
Long-term Debt Ratio LT debt/(LT debt +equity)
Times interest earned EBIT/interest payments
Cash Coverage Ratio (EBIT+depreciation)/interest payments
Net Working Capital to Total Assets NWC/Total assets
Current Ratio current assets/current liabilities
Quick Ratio (cash+marketable securities+receivables)/current liabilities
Payout Ratio dividends/earnings
Sustainable Growth (1-Payback Ratio) x ROE

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