CFA Finance Ratio

Finance Ratio:

ROE = NI / Equity
ROA = NI / Assets
ROIC = NOPAT / invested capital
  - investment focus
  - invested capital = debt + equity - cash

ROCE = EBIT / Capital Employed
  - pretax, operating focus

Financial Leverage Ratio (Equity Multiplier) =  Avg Total Assets / Avg Total Equity

Asset Turnover = Sales / Assets
Inventory Turnover = COGS / Average Inventory

Interest Coverage Ratio = EBIT/Interest Expense

RI = ((ROIC - WACC) * Assets)
RI = (ROE - r) * BV
RI = NI - r*BV

EVA = NOPAT - WACC * Total Assets

EBIT - Interest Expense = Pretax profit
Pretax profit - tax = NI

Accounting Profit = Normal Profit + Economic Profit

Cash Conversion Cycle
CCC = DOH + DSO - DPO
the smaller the number, the better it is

Good Will:

EQUITY METHOD:

Full Goodwill –> Fair Value - Book Value of Net Identifiable assets (same under IFRS and US GAAP)

And then we allocate the above calculated difference (i.e. the excess purchase price) to subsidiary’s those assets whose fair values exceed their book values. What we get after allocation is the goodwill which is essentially same as the difference between subsidiary’s fair value and parent’s proportionate share of net identifiable assets.

ACQUISITION METHOD:

Full Goodwill –> Fair value of entity - Fair Value of Identifiable Net assets (same under IFRS and US GAAP)

Partial Goodwill –> Purchase Price - Proportionate share of Fair Value of Identifiable Net Assets (only under IFRS)