IT PROJECT ANALYSIS AND PROPOSAL

Financial Formula Sheet

Average investment =

Average rate of return =

Current ratio =

Days’ sales outstanding = × number of days in the period (for a quarter, use 120 days)

Debt ratio =

Dividends per share =

Earnings per share on common stock =

Future value = present value × (1 + r)n, where r is the rate of return and n is the number of years

Inventory turnover ratio =

Market value = purchased price – selling price – selling expenses

Net cash flow = net income + depreciation + amortization

Net present value = expected cash inflows – amount to be invested

Operating income = gross income – operating expenses – depreciation – amortization

Present value factor = , where r is rate of return and n is number of years

Present value of an annuity = sum of present value factors × initial investment

Price/earnings ratio =

Profit margin ratio =

Quick ratio or acid test =

Ratio of fixed assets to long-term liabilities =

Ratio of free cash flow to sales =

Ratio of liabilities to stockholders’ equity =

Return on total assets =

Return on common stockholders’ equity =

Straight-line depreciation =

Times interest earned =

Working capital = current assets – current liabilities

You may need to compute the weighted average cost of capital (WACC) based on non-percentage inputs or based on percentage inputs. There are two formulas below. The first formula should be utilized when the inputs you are given are percentages. The second formula should be used when inputs are not percentages.

WACC with percentages. All projects must be entirely funded (100%).

Equity = e% Cost of equity = coe%

Debt = d% Cost of debt = cod%

Stock = s% Cost of stock = cos%

WACC =

Weighted average cost of capital (WACC) =