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STUDY UNIT 1
STUDY UNIT 2
STUDY UNIT 3
STUDY UNIT 4
STUDY UNIT 5
STUDY UNIT 6
STUDY UNIT 7
STUDY UNIT 8
STUDY UNIT 9
STUDY UNIT 10
CMA PART 2
EHICS, FRAUD & RISK MANAGEMENTS
FINANCIAL MARKETS & TYPES OF SECURITIES
VALUATION METHODS & COST OF CAPITAL
MANAGING CURRENT ASSETS
CORPORATE RESTRUCTURING & INTERNATIONAL FINANCE
RATIO ANALYSIS
ACTIVITY MEASUSRES & FINANCING
INVESTMENT DECISIONS
CVP ANALYSIS
MARGINAL ANALYSIS & PRICING
VALUATIN OF METHOD ABD COST OF CAPITAL SU 3
IACS
1 EPS=
NO OF COMMON SHARE OUTSTANDING
MPS
5 PRICE/EBITDA RATIO=
EBITDA PER SHARE
DIVIDEND DECLARED
7 DPS=
NO OF COMMON SHARES
MPS
9 PE RATIO=
EPS
EPS
10 EARNINGS YIELD=
MPS
DPS
11 DIVIDEND YIELD=
MPS
MPS
13 MARKET TO BOOK RATIO (PRICE BO
BVPS
MPS
14 PRICE SALES RATIO=
SALES PER SHARE
COST OF CAPITAL:
DEBT CAPITAL (BOND & DEBENTURES)
I (1-T)
15 NEW=
NET AMOUNT RECEIVED
I (1-T)
16 CURRENT=
FACE VALUE OR CURRENT MV
D
18 CURRENT=
CURRENT MV
D
20 CURRENT: WITH ZERO GROWTH =
CURRENT MV
D
21 CURRENT: WITH GROWTH RATE= (
CURRENT MV
22 WACC :
IT'S A COST OF COMBINED CAPITAL OF BOTH DEBT & EQUITY
FOLLOWINGS ARE THE STEPS TO CALCULATE WACC:
STEPS
1 CALCULATE THE PROPORTIONATE OF CAPITAL
2 CALCULATE EFFECTIVE COST OF CAPITAL
3 CALCULATE PRODUCT OF PROPORTIONS WITH THE RESPECTIVE COST OF CAPITAL
4 SUM OF STEP 3
EXAMPLE
LONG TERM DEBT 7000
PREFERENCE STOCK (100 SHARES) 1000
COMMON STOCK (200 SHARES) 7000
*BONDS CURRENTLY SELLING @80% OF PAR & CURRENT MARKET YIELD OF 9% WITH THE TAX RATE OF 40%
*PREFERRED STOCK SELLING @ PAR VALUE & PAYS 6% DIVIDEND.
*COMMON STOCK HAS A CURRENT MV OF $40 & EXPECTED PAY @ $1.2 PER SHARE DIVIDEND THIS FISCAL YEAR.
*DIVIDEND GROWTH IS EXPECTED TO BE 10% PER YEAR
SOLUTION STEP 1
INCOME STATEMENT
PATICULARS AMOUNT
SALES XXX
LESS: COGS XXX
GROSS PROFIT XXX
LESS: OPEX
ADMINISTRATIVE EXP. XXX
SELLING EXP. XXX
DISTRIBUTION EXP. XXX XXX
EBIT (OPERATING PROFIT) XXX
LESS: INTEREST (FINANCE COST) XXX
EBT XXX
LESS: TAX (%) XXX
NET INCOME XXX
LESS: DIVIDEND (PREFERENCE SHARE HOLDERS) XXX
IACS (INCOME AVAILABLE TO COMMON SHARE HOLDERS XXX
STANDING
ER SHARE
DEND GROWTH RATE
D X (1 + GROWTH RATE)t
FERRED EQUITY)
COMMON SHARE
D
RES
AREHOLDERS)
X 100
X100
X100
T MV
X 100
ED
X 100
ED
D
X 100) + G
ENT MV
STEP 4
9.61 140240
TOTAL
300000
15000
20000
25000
833.33
360833.33
MANAGING CURRENT ASSETS SU 4
EOQ (ECONOMIC ORDER QUANTITY) MODEL FOR CASH MANAGEMENT
Q= √2BT/I
RECEIVABLE MANAGEMENT
INCREMENTAL AVERAGE COLLECTION PERIOD
2 INCREMENTAL VARIABLE COSTS X
DAYS IN YEAR
PORTFOLIO MANAGEMENT
3 EXPECTED RATE OF RETURN= ∑PXR
D+ (I1 - I0)
ROI= X 100
I0
4
D= DIVIDEND
I1= INVESTED AMOUNT RECEIVED
I0= AMOUNT INVESTED
STANDARD DEVIATION
6 COEFFICIETT OF VARIATION=
EXPECTED RETURN OR RATE OF RETURN
INVENTORY MANAGEMENT
9 EOQ (ECONOMIC ORDER QUANTITY)= √2ad/k
V1 X STD DEV2
demand in units)
ock (carrying cost per unit)
SAFETY STOCK QT
2 LIQUIDITY RATIOS:
CURRENT ASSETS
A CURRENT RATIO=
CURRENT LIABILITIES
3 PROFITABILITY RATIOS:
NET SALES - COGS
A GROSS PROFIT MARGIN RATIO=
NET SALES
NET INCOME
C NET PROFIT MARGIN RATIO=
NET SALES
EBITDA
D EBITDA=
NET SALES
NET INCOME
E RETURN ON ASSETS (ROA/ROTA)=
TOTAL AVERAGE ASSETS
NET INCOME
F RETURN ON EQUITY (ROE)=
AVERAGE TOTAL EQUITY
TOTAL DEBT
B DEBT TO EQUITY RATIOS=
SHAREHOLDERS EQUITY
TOTAL LIABILITIES
D DEBT TO TOTAL ASSETS RATIO=
TOTAL ASSETS
TOTAL DEBTS
E DEBT RATIO=
TOTAL ASSETS
5 EARNINGS COVERAGE
EBIT
A TIME INTEREST EARNED RATIO=
INTEREST EXPENSES
6 LEVERAGE:
PRE FIXED COST INCOME AMOUNT
A DEGREE OF LEVERAGE=
POST FIXED COST INCOME AMOUNT
+ NET RECEIVABLES
ILITIES
NET SALES
AVERAGE TOTAL ASSETS
OTAL ASSET TURNOVER)
NET SALES AVERAGE TOTAL ASSETS
X
AVERAGE TOTAL ASSETS AVERAGE TOTAL EQUITY
OTAL ASSET TURNOVER) (EQUITY MULTIPLIER)
DAYS IN YEAR
B DAYS SALES OUTSTANDING IN RECEIVABLES=
ACCOUNTS RECEIVABLE TURNOVER
2 INVENTORY
COGS
A INVENTORY TURNOVER=
AVERAGE INVENTORY
DAYS IN YEAR
B DAYS SALES INVENTORY=
INVENTORY TURNOVER
3 PAYABLES
PURCHASES
A ACCOUNTS PAYABLE TURNOVER=
AVERAGE ACCOUNTS PAYABLES
DAYS IN YEAR
B DAYS PURCHASES IN ACCOUNTS PAYABLE=
ACCOUNTS PAYABLE TURNOVER
SALES
7 WORKING CAPITAL TURNOVER=
WORKING CAPITAL
NET SALES
8 FIXED ASSETS TURNOVER RATIO=
AVERAGE NET PROPERTY,PLANT & EQUIPMENT
NET SALES
9 TOTAL ASSETS TURNOVER RATIO=
AVERAGE TOTAL ASSETS
1
A DISCOUNT TAKEN= INVOICE AMOUNT X (1.0-DISC%)
DR DAYS IN YEAR
B COST OF NOT TAKING DISCOUNT= X
100-DR NET PERIOD - DISCOUNT PERIOD
SRI
B ERI ON DISCOUNTED RATE=
(100-SRI)
4 DISCOUNTED LOANS
USABLE FUNDS
A LOAN AMOUNT=
(100-SRI)
USABLE FUNDS
A LOAN AMOUNT=
(100-CB%)
SRI
B EFFECTIVE RATE WITH CB =
(100-CB%)
SRI
C EFFECTIVE RATE WITH CB ON DISCOUNTED RATE=
(100-SRI-CB%)
6 LINES OF CREDIT
ES
LANT & EQUIPMENT
ES
L ASSETS
DAYS IN YEAR
IOD - DISCOUNT PERIOD
GE BALANCE + COMMITMENT FEE ON UNUSED PORTION
LIMIT -AVERAGE BALANCE) X COMMITMENT FEE%)
3 NET PRESENT VALUE= (AFTER TAX CASH FLOW * PRESENT VALUE OF AN ANNUITY)-NET INVESTMENT
S
CVP ANALYSIS FORMULAS SU 9
1 BEP FOR SINGLE PRODUCTS
B BEP IN UNITS=
D BEP IN $ =
E MARGIN OF SAFETY =
3 Class Formulas:
A CONTRIBUTION =
B PROFIT =
C FIXED COST
D CONTRIBUTION =
E CONTRIBUTION MARGIN RATIO =
F BEP:
G BEP in Units
H BEP in Qty
I Target Profit
J TP after tax
FIXED COSTS
UNIT CONTRIBUTION MARGIN
FIXED COST
CONTRIBUTION MARGIN RATIO
MARGIN OF SAFETY
PLANNED SALES
FIXED COST
WEIGHTED AVERAE COST -WEIGHTTED AVERAGE VARIABLE COST
FIXED COST+ P*/COST PER UNIT (P* INDICATES TARGET PROFIT) (= FC + P*/CPU (*INDICATES TARGET PROFIT)
#NAME?
= F + [P/1-T]/CMR
INFORMATION REQUIRED:
1. SP OF PRODUCTS
2. VC OF PRODUCTS
3. FC OF TOTAL PRODUCTS
4. SMR (SALES MIXED RATIO)
STEPS:
1. CALCULATE CONTRIBUTION (S-V) ALL PRODUCTS
2. CALCULATE PROPORTIONATE CONTRIBUTION OF EACH PRODUCT USING SMR
3. CALCULATE THE TOTAL UNIT CONTRIBUTION OF MULTI PRODUCT
4. APPLY THE FORMULA = FC/COMBINED CPU
5. AFTER GETTING TOTAL BEP IN UNITS MULTIPLY WITH THE INDIVIDUAL PRODUCT SMR TO GET ITEMIZED BEP.
ANNEXURE
TEMIZED BEP.
MARGINAL ANALYSIS & PRICING SU 10
(Q1-Q0) / (Q1+Q0)
5 MID POINT METHOD (ACCURATE)=
(P1-P0) / (P1+P0)