Evaluation of Financial Policy
GBA 546
Formula Sheet
Prepared by P. Sarmas

Cash Flow from Assets = Cash Flow to Creditors + Cash Flow to Stockholders

Operating Cash Flow Interest Paid Dividend Paid
- Net Working Capital - Net New Borrowing - Net New Equity
- Net Capital Spending Cash Flow to Creditors Cash Flow to Stockholders
Cash Flow from Assets

EBIT Ending Net Fixed Assets
+ Depreciation - Beginning Net Fixed Assets
- Taxes + Depreciation .
Operating Cash Flow Net Capital Spending

Ending Net Working Capital (CA – CL)
- Beginning Net Working Capital (CA-CL)
Change in Net Working Capital

Ending L.T. Debt Ending Equity
- Beginning L.T. Debt - Beginning Equity
Net New Borrowing - Addition to Retained Earnings Net New Equity

Dividend Payout Ratio = Dividends  Net Income

ROADuPont = Profit Margin * Total Assets t/o

ROEDuPont = Profit Margin * Total Assets t/o * Equity Multiplier

Earnings Retention Ratio = b = 1 – Dividend Payout Ratio = 1- DIV/NI

(1+R) = (1+r)*(1+h)

Operating Cycle = Inventory Period + Accounts Receivable Period

Cash Cycle = Operating Cycle – Accounts Payable Period

Operating Cash Flow = EBIT + Depreciation – Taxes

Operating Cash Flow = (Sales – OC – Depreciation)*(1-T) + Depreciation

Operating Cash Flow = Net Income + Depreciation

Operating Cash Flow = (Sales – OC)*(1 – T) + T*Depreciation

Book Value of Asset = Original Cost – Accumulated Depreciation

VC = Q*v
TC = VC + FC
NI = (S – FC – VC – D)*(1-T)

E(Rp) = WA*E(RA) + WB*E(RB)
R = E(R) + U

WACC = WE*RE + WP*RP + WD*RD*(1-tc)

WE + WP + WD = 1

Modified