Formula Sheet FSA
Lecture 1 & Practice Session 1
P0=¿
CE t =CE t−1 +¿t −¿t
Residual Income ¿t −r∗CE t−1
P0=CE 0 + E 0 ¿
P0=CE 0 + E 0 ¿
ROE= ¿
CE
Earnings for the period
ROI=
Investment at the beginning of the period
CF t
V 0=E 0
[( )]
( 1+r )t
Constant Growth P0=CE 0 + E 0 ¿
Sales−COGS
Gross Margin
Sales
Sales
Inventory turnover
Inventories
Lecture 2 & Practice Session 2
IRR: Internal rate of return (IRR) is the interest rate at which the net present value of all the
cash flows (both positive and negative) from a project or investment equal zero
P1 P2 P3 Pn
0 = P0 + + + +...+
(1+ IRR) ( 1+ IRR ) ² ( 1+ IRR ) ³ (1+ IRR)n
1
, ¿
ROE: Book value of equity et t−1
1 1
Q-score = HR i ,t −( ∗HR i ,t −1+ ∗HR industry ,t )
2 2
Provision: Banks and lenders, for example, often estimate the percentage of sales that may
become doubtful debt and then deduct that amount from their revenue during each
accounting period. The provision for bad debts is a reserve against the future recognition of
an amount of money that cannot be collected;
Lecture 3 & Practice Session 3
Earnings for the period Net income∈ period t
ROE = =
Average equity duringthe period (End CEt +CEt −1=beginning)/ 2
Net Operating Income (NOI): (EBIT + Non-Operating Income)(1-tax) + Other Income - Ext.
Items + Disc. Ops.
Tax: effective tax rate = (income tax expense)/(earnings before taxes)
Net Financing Expense (NFE): interest expense*(1-tax) + preferred dividends + minority
interest in earnings
Net Operating Income (NOI): net income + net financing expense
Net Financial Obligations (NFO): debt + preferred stock + minority interest - financial assets*
Net Operating Assets (NOA): invested capital = total assets – (total liabilities - NFO)
Net Operating Assets (NOA): common equity + NFO
* Depending on whether they are really financial and not operating assets
The Advanced DuPont decomposition of ROE (1)
2
Lecture 1 & Practice Session 1
P0=¿
CE t =CE t−1 +¿t −¿t
Residual Income ¿t −r∗CE t−1
P0=CE 0 + E 0 ¿
P0=CE 0 + E 0 ¿
ROE= ¿
CE
Earnings for the period
ROI=
Investment at the beginning of the period
CF t
V 0=E 0
[( )]
( 1+r )t
Constant Growth P0=CE 0 + E 0 ¿
Sales−COGS
Gross Margin
Sales
Sales
Inventory turnover
Inventories
Lecture 2 & Practice Session 2
IRR: Internal rate of return (IRR) is the interest rate at which the net present value of all the
cash flows (both positive and negative) from a project or investment equal zero
P1 P2 P3 Pn
0 = P0 + + + +...+
(1+ IRR) ( 1+ IRR ) ² ( 1+ IRR ) ³ (1+ IRR)n
1
, ¿
ROE: Book value of equity et t−1
1 1
Q-score = HR i ,t −( ∗HR i ,t −1+ ∗HR industry ,t )
2 2
Provision: Banks and lenders, for example, often estimate the percentage of sales that may
become doubtful debt and then deduct that amount from their revenue during each
accounting period. The provision for bad debts is a reserve against the future recognition of
an amount of money that cannot be collected;
Lecture 3 & Practice Session 3
Earnings for the period Net income∈ period t
ROE = =
Average equity duringthe period (End CEt +CEt −1=beginning)/ 2
Net Operating Income (NOI): (EBIT + Non-Operating Income)(1-tax) + Other Income - Ext.
Items + Disc. Ops.
Tax: effective tax rate = (income tax expense)/(earnings before taxes)
Net Financing Expense (NFE): interest expense*(1-tax) + preferred dividends + minority
interest in earnings
Net Operating Income (NOI): net income + net financing expense
Net Financial Obligations (NFO): debt + preferred stock + minority interest - financial assets*
Net Operating Assets (NOA): invested capital = total assets – (total liabilities - NFO)
Net Operating Assets (NOA): common equity + NFO
* Depending on whether they are really financial and not operating assets
The Advanced DuPont decomposition of ROE (1)
2
