Summary Equations for Accountancy and Finance for Lawyers
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Course
620300-B-6
Institution
Tilburg University (UVT)
This document includes all equations used throughout the Accountancy and Finance for Lawyers course (3rd year Global Law, Business Minor).
Very useful collection to have during exam.
Includes explanation and breakdown of all equations.
Return on assets = net income / average total assets
Return on equity = net income / average total equity
>> average total assets/equity = (last year’s assets/equity + this year’s assets/equity) / 2 <<
TURNOVER RATIO
revenue / total assets
EPS
Earnings per share = net income attributable to common stock / average common shares outstanding
Price-to-earnings = share price / earnings per share
LIQUIDITY
Net working capital = current assets - current liabilities
Current ratio = current assets / current liabilities
Quick / acid test ratio
= (current assets - inventory) / current liabilities
= (cash + marketable securities + receivables) / current liabilities
= (cash + cash equivalents) / current liabilities.
SOLVENCY
Income statement analysis
, Interest cover ratio = (net income + interest expense + tax expense) / interest expense
Balance sheet analysis
Leverage ratio = assets / equity
Longterm debt to equity ratio = longterm debt / equity
Debt service analysis ratios
EBITDA = EBIT + depreciation
EBITDA cover ratio = EBITDA / interest expense
Interest cover ratio
= EBIT / interest expense
EBIT = net income + tax exp + interest exp
STANDARD DEVIATION
Step 1: Find the mean.
Step 2: For each data point, find the
square of its distance to the mean.
Step 3: Sum the values from Step 2.
Step 4: Divide by the number of data
points.
Step 5: Take the square root
STANDARD ERROR
PRESENT VALUE - MONEY
Present value = future value / (1 + r)n
- Future value of the cash flow (PV)
- Interest rate (r) or the discount rate
- Time period (n)
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