WGU Principles of Finance C708
Formulas
Assets = Liability + OE ✔✔The Balance Sheet Equation
Old RE + NI - Dividends ✔✔Net Income for New Retained Earnings
NI - Dividends ✔✔Change in Retained Earnings
CA/CL ✔✔Current Ratio (Liquidity Ratio)
(CA - Inv)/CL ✔✔Quick Ratio a.k.a. Acid Test (Liquidity Ratio)
AR/Daily Credit Sales ✔✔Average Collection Period (Liquidity Ratio)
Credit Sales/AR ✔✔Accounts Receivable Turnover (Liquidity Ratio)
COGS/Inv ✔✔Inventory Turnover (Liquidity Ratio)
Sales/TA ✔✔Total Asset Turnover (Efficiency Ratio)
Sales/Net PP&E ✔✔Fixed Asset Turnover (Efficiency Ratio)
EBIT/TA ✔✔Operating Income Return On Investment (OIROI) (Efficiency Ratio)
Total Liabilities/TA ✔✔Debt Ratio (Financing Ratio)
EBIT/Interest Expense ✔✔Times Interest Earned (TIE) (Financing Ratio)
, NI/TA ✔✔Return on Assets (ROA) (Profitability Ratio)
NI/E ✔✔Return on Equity (ROE) (Profitability Ratio)
(Sales - COGS)/sales ✔✔Gross Margin (Profitability Ratio)
EBIT/Sales ✔✔Operating Margin (Profitability Ratio)
NI/Sales ✔✔Net Margin (Profitability Ratio)
NI/S x S/A x A/E ✔✔DuPont Decomposition/DuPont Equation (Profitability Ratio)
EBIT - taxes + depreciation - (current year PP&E - last year PP&E) - (CY CA - CY CL) - (LY CA
- LY CL) ✔✔Free Cash Flow to the Firm (FCFF)
NI + Depreciation Expense - CAPEX - change in NWC -
change in LTD ✔✔Free Cash Flow to Equity (FCFE)
NOPAT - [ WACC (costly capital)] ✔✔Economic Value Added (EVA)
projected TA - projected TL - projected OE ✔✔Discretionary Financing Need (DFN)
[(New - Old)/Old + 1] x Old ✔✔Projected DFN
Risk free rate + risk premium ✔✔Discount Rate/Required Rate of Return
Before tax cost of debt (1- tax rate) ✔✔After-Tax Cost of Debt
Formulas
Assets = Liability + OE ✔✔The Balance Sheet Equation
Old RE + NI - Dividends ✔✔Net Income for New Retained Earnings
NI - Dividends ✔✔Change in Retained Earnings
CA/CL ✔✔Current Ratio (Liquidity Ratio)
(CA - Inv)/CL ✔✔Quick Ratio a.k.a. Acid Test (Liquidity Ratio)
AR/Daily Credit Sales ✔✔Average Collection Period (Liquidity Ratio)
Credit Sales/AR ✔✔Accounts Receivable Turnover (Liquidity Ratio)
COGS/Inv ✔✔Inventory Turnover (Liquidity Ratio)
Sales/TA ✔✔Total Asset Turnover (Efficiency Ratio)
Sales/Net PP&E ✔✔Fixed Asset Turnover (Efficiency Ratio)
EBIT/TA ✔✔Operating Income Return On Investment (OIROI) (Efficiency Ratio)
Total Liabilities/TA ✔✔Debt Ratio (Financing Ratio)
EBIT/Interest Expense ✔✔Times Interest Earned (TIE) (Financing Ratio)
, NI/TA ✔✔Return on Assets (ROA) (Profitability Ratio)
NI/E ✔✔Return on Equity (ROE) (Profitability Ratio)
(Sales - COGS)/sales ✔✔Gross Margin (Profitability Ratio)
EBIT/Sales ✔✔Operating Margin (Profitability Ratio)
NI/Sales ✔✔Net Margin (Profitability Ratio)
NI/S x S/A x A/E ✔✔DuPont Decomposition/DuPont Equation (Profitability Ratio)
EBIT - taxes + depreciation - (current year PP&E - last year PP&E) - (CY CA - CY CL) - (LY CA
- LY CL) ✔✔Free Cash Flow to the Firm (FCFF)
NI + Depreciation Expense - CAPEX - change in NWC -
change in LTD ✔✔Free Cash Flow to Equity (FCFE)
NOPAT - [ WACC (costly capital)] ✔✔Economic Value Added (EVA)
projected TA - projected TL - projected OE ✔✔Discretionary Financing Need (DFN)
[(New - Old)/Old + 1] x Old ✔✔Projected DFN
Risk free rate + risk premium ✔✔Discount Rate/Required Rate of Return
Before tax cost of debt (1- tax rate) ✔✔After-Tax Cost of Debt
