Financial Formulas C928 Financial Management for IT Professionals The following financial formulas are provided, as shown, with each item on the pre-assessment and Objective Assessment. Return on assets = net income total assets net income - dividends Return on equity - average common stockholders' equity Acid test = quickly convertible assets current liabilities Straight-line depreciation = Purchase price - residual value expected life Average investment = Initial cost + residual value You may need to compute WACC based on non-percentage inputs or based on percentage inputs. Average rate of return = average annual income There are two formulas below. The first formula should be utilized when the inputs you are given average investment are percentages. The second formula should be used when inputs are not percentages. Current ratio = _current assets current liabilities Weight Average Cost of Capital (WACC) with percentages. All projects must entirely be funded (100%) Days' sales outstanding = - accounts receivable annual sales x number of days in the period (usually 365) Debt ratio = total liabilities Equity = e% Cost of Equity = coe% total assets Debt = d% Cost of debt = cod% Earnings per share = net earnings number of outstanding shares Stock =5% Cost of Stock = cos% Future value = present value x (1 + r)", where r is rate of return and n is number of years WACC = (e% *coe%) + (d%*cod%) + ($%*cos%) Inventory turnover ratio = cost of goods sold average inventory Weighted cost of capital (WACC) = (total capital * cost of equity) + (total capital * (cost of debt Market value = purchased price - selling price - selling expenses debt x (100 - tax rate)) Net cash flow = net income + depreciation + amortization Net present value = expected cash inflows - amount to be invested Net working capital = current assets - current liabilities Operating income = gross income - operating expenses - depreciation - amortization Present value factor = "(1 + rjan) Where r is rate of return and n is number of years Present value of an annuity = sum of present value factors x initial investment Price/earnings ratio = - stock price earnings per share Profit margin ratio = net income net sales Quick ratio = cash + cash equivalents + short term investments + current receivables current liabilities Ratio of free cash flow to sales = free cash flow salesAll in ations except pershare amounts Category Fiscal Year 1 Fiscal Year | % Change All $ in millions except per share amounts ASSETS 15 Current Assets: Category Fiscal Year 1 Fiscal Year 2 % Change Cash & cash equivalents $6,640 $7,636 15.0% Marketable securities $11,899 $12,851 8.0%% INCOME: Accounts receivable (net) $7,234 $7,957 10.0% Product & services income $76,708 $90,515 18.0% Inventory $12,463 $12,089 -3.0% 20 Deferred costs $1,348 $1,618 20.0%% Returns & adjustments -$1,151 -$1,358 18.0% 21 Prepaid expenses $7,651 $8,569 12.0% 22 Other current assets $94 $990 5.0% Cost of product & services income -$39,121 -$46,163 18.0% 3 Total Current Assets $48,178 $51,710 7.3%% Gross Profit from Product & Services $36,436 $42,995 18.0% 24 Long-term Assets: 25 Property, plant, & equipment $28,841 $33,167 15.0% Intellectual property income $7,677 $9,980 30.0% Less accumulated depreciation $13,352 $15,355 15.0% Property, plant, & equipment (net) $15,489 $17,812 15.0% Other income $5,936 $6,411 8.0% 28 Operating right of use (net) $3,100 $3.410 10.0%% Total Income $50,049 29 $59,386 30 Long-term financing receivables $5,578 $5,968 7.0% 18.7% Prepaid pension assets $6,520 $6,716 3.0% EXPENSES: 31 Deferred costs $1,068 $1,121 5.0% 32 Deferred taxes $6,329 $6,456 2.0% Sales, general, & administrative $17,778 $19,911 12.0% 33 Goodwill $53,440 $56,646 6.0%% 34 Intangible assets (net) $11,297 $11,749 4.0% Research, development, & engineering $6,753 $7,969 18.0% 35 nvestments & sundry assets $1,546 $1,577 2.0% Interest expense (net) $1,174 $1,526 30.0% 6 Total Long-term Assets $104,367 $111,456 6.8% 37 Total Assets $152,545 $163.166 7.0% Other expenses $4,238 $4,662 10.0% 38 IABILITIES & EQUITY 39 Current Liabilities: Total Expenses $29,943 $34,068 13.8% 40 Taxes $2,626 $3,099 18.0% 41 $4,126 $4,126 0.0%% Net income before income taxes $20,106 $25,318 25.9% Short-term debt 42 Accounts payable $5,969 $6,208 4.0% Income taxes $3,619 $4,557 25.9% 43 Compensation & benefits $3,776 $3,965 5.0% 44 Deferred income $12,135 $13,470 11.0% Net Income $16,487 $20,761 25.9% 45 Operating lease liabilities $959 $1,026 7.0% 46 Other accrued expenses & liabilities $4,311 $4,570 6.0%% Earnings (loss) per share of common stock $18 $23 24.1% 47 Total Current Liabilities $33,902 36,463 7.6%% Weighted average number of shares of 48 Long-term Liabilities: 49 Long-term debt $9.608 $9,320 -3.0% common stock outstanding 894,163,268 907,575,717 1.5% 50 Retirement & non pension obligations $10,048 $9,546 -5.0% 51 Deferred income $3,492 $3,667 5.0%% 52 Operating lease liabilities $2,205 $2,359 7.0%% 53 Other long-term liabilities $12,396 $11,404 -8.0% 54 Total Long-term Liabilties 37,749 $36,296 -3.9% 55 Total Liabilities $71,651 $72,759 1.5%% 56 Equity: 57 Common stock par value & paid in capital $33,481 $38,503 15.0% 58 Shares authorized 4,687,500,000 59 Shares issued Year 1- 1,350,509,249 Shares issued Year 2 - 1,351,024,943 $1 Retained Earnings $47,413 $51,904 9.5%% 62 Total Stockholders Equity $80,894 $90,407 11.8% 63 Total Liabilities & Equity $152,545 $163.166 7.0%