CFA level 1 formula sheets sample

2016

CFA® EXAM REVIEW

COVERS
ALL TOPICS
IN LEVEL I

LEVEL I CFA­
®

FORMULA SHEETS


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Financial Analysis Techniques

Financial Analysis Techniques
Inventory Turnover
Inventory turnover =

Cost of goods sold
Average inventory

Days of Inventory on Hand
Days of inventory on hand (DOH) =

365
Inventory turnover

Receivables Turnover
Receivables turnover =

Revenue
Average receivables

Days of Sales Outstanding
Days of sales outstanding (DSO) =

365
Receivables turnover

Payables Turnover
Payables turnover =

Purchases
Average trade payables

Number of Days of Payables
Number of days of payables =

365
Payables turnover

Working Capital Turnover
Working capital turnover =

Revenue
Average working capital

Fixed Asset Turnover
Fixed asset turnover =

Revenue
Average fixed assets

Total Asset Turnover
Total asset turnover =

46

Revenue
Average total assets

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Financial Analysis Techniques

Current Ratio
Current ratio =

Current assets
Current liabilities

Quick Ratio
Quick ratio =

Cash + Short-term marketable investments + Receivables
Current liabilities

Cash Ratio

Cash ratio =

Cash + Short-term marketable investments
Current liabilities

Defensive Interval Ratio
Defensive interval ratio =

Cash + Short-term marketable investments + Receivables
Daily cash expenditures

Cash Conversion Cycle
Cash conversion cycle = DSO + DOH − Number of days of payables

Debt‐to‐Assets Ratio
Debt -to-assets ratio =

Total debt
Total assets

Debt‐to‐Capital Ratio
Debt -to-capital ratio =

Total debt
Total debt + Shareholders’ equity

Debt‐to‐Equity Ratio
Debt -to-equity ratio =

Total debt

Shareholders’ equity

Financial Leverage Ratio
Financial leverage ratio =

Average total assets
Average total equity

Interest Coverage Ratio
Interest coverage ratio =

EBIT
Interest payments

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47


Financial Analysis Techniques

Fixed Charge Coverage Ratio
Fixed charge coverage ratio =

EBIT + Lease payments
Interest payments + Lease payments

Gross Profit Margin
Gross profit margin =

Gross profit
Revenue

Operating Profit Margin
Operating profit margin =

Operating profit
Revenue

Pretax Margin
Pretax margin =

EBT (earnings before tax, but after interest)
Revenue

Net Profit Margin
Net profit margin =

Net profit
Revenue

Return on Assets
ROA =

Net income
Average total assets

Adjusted ROA =

Net income + Interest expense (1 − Tax rate)

Average total assets

Operating ROA =

Operating income or EBIT
Average total assets

Return on Total Capital
Return on total capital =

EBIT
Short-term debt + Long-term debt + Equity

Return on Equity
Return on equity =

Net income
Average total equity

Return on Common Equity
Return on common equity =

48

Net income − Preferred dividends
Average common equity

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Financial Analysis Techniques

DuPont Decomposition of ROE
Net income
Average shareholders’ equity

ROE =

2‐Way Dupont Decomposition
Net income
Average total assets
×
Average total assets Average shareholders’ equity

ROE =

↓

↓

ROA

Leverage

3‐Way Dupont Decomposition
Net income
Average total assets
Revenue
×
×

Revenue
Average total assets Average shareholders’ equity

ROE =

↓

↓

Net profit margin

↓

Asset turnover

Leverage

5‐Way Dupont Decomposition

ROE =

Interest burden

Asset turnover

↓

↓

Net income EBT

Average total assets
EBIT
Revenue
×
×
×
×
EBT
EBIT Revenue Average total assets Avg. shareholders’ equity
↓

↓

↓

Tax burden

EBIT margin

Leverage

Price‐to‐Earnings Ratio
P /E =

Price per share
Earnings per share

Price to Cash Flow
P /CE =

Price per share
Cash flow per share

Price to Sales
P /S =

Price per share
Sales per share

Price to Book Value
P /BV =

Price per share
Book value per share

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