financial formulas

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The flashcards below were created by user wsrdpc on FreezingBlue Flashcards.

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

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 Author: wsrdpc ID: 82315 Filename: financial formulas Updated: 2011-04-28 01:45:28 Tags: financial formulas Folders: Description: exam 2 formulas Show Answers:

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