CS EXECUTIVE – CORPORATE ACCOUNTING & FINANCIAL MANAGEMENT
ALL IMPORTANT FORMULAS (Revision Sheet)
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PART A – CORPORATE ACCOUNTING
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1. Goodwill Valuation
• Average Profit = Total Profit / Number of Years
• Super Profit = Average Profit – Normal Profit
• Normal Profit = Capital Employed × Normal Rate of Return
• Goodwill (Super Profit Method) = Super Profit × Number of Years’ Purchase
• Goodwill (Capitalisation Method) = Super Profit / Normal Rate of Return
2. Valuation of Shares
• Intrinsic Value per Share = (Net Assets – External Liabilities) / Number of Shares
• Yield Value = (Expected Rate of Dividend × Paid-up Value) / Normal Rate of Return
3. Forfeiture & Reissue of Shares
• Amount forfeited = Amount received till forfeiture
• Profit on reissue = Reissue price – Amount forfeited (to CRR)
4. Preference Share Redemption
• Fresh Issue Required = Redeemable Amount – Available Reserves
• CRR = Nominal value of shares redeemed – Fresh issue amount
5. Buy-back of Shares
• Maximum Limit = 25% of Paid-up capital + Free Reserves
• Debt-Equity Ratio after Buy-back ≤ 2:1
6. Debenture Redemption
• Interest = (Face Value × Rate × Time) / 100
• Sinking Fund Installment = (Amount to Accumulate / Future Value Factor)
7. Cash Flow Statement (AS 3)
• CFO (Indirect Method) = Net Profit + Non-cash expenses – Non-operating income ± Working
capital changes
• CFI = Purchase/Sale of PPE + Investments
• CFF = Issue/Redemption of Shares/Debentures + Dividend + Interest payments
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PART B – FINANCIAL MANAGEMENT
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8. Time Value of Money
• Future Value = PV × (1+r)^n
• Present Value = FV / (1+r)^n
• PV of Annuity = C × [(1 – (1+r)^–n) / r]
• FV of Annuity = C × [((1+r)^n – 1) / r]
9. Cost of Capital
• Cost of Equity (DGM) = (D1 / P0) + g
• Cost of Equity (CAPM) = Rf + β (Rm – Rf)
• Cost of Preference Shares = D / P0
• Cost of Debentures = Interest × (1 – Tax Rate) / Net Proceeds
• WACC = Σ (Weight × Cost)
10. Leverages
• Operating Leverage = Contribution / EBIT
• Financial Leverage = EBIT / EBT
• Combined Leverage = Contribution / EBT
11. Capital Budgeting
• NPV = Σ (Cash Inflow / (1+r)^n ) – Initial Investment
• PI = PV of Cash Inflows / Initial Investment
• Payback Period = Initial Investment / Annual Cash Inflow
• IRR → NPV = 0 (use interpolation)
• ARR = Avg Profit / Avg Investment × 100
12. Working Capital Management
• Operating Cycle = (Raw Material Period + WIP Period + Finished Goods Period + Debtors Period
– Creditors Period)
• Working Capital Requirement = Operating Expenses × Operating Cycle (in months)
13. Dividend Decision
• Gordon Model = P = (E × (1 – b)) / (k – b × r)
• Walter Model = P = [D + (r/k)(E-D)] / k
14. Portfolio & Risk
• Expected Return = Σ (Pi × Ri)
• Beta = Covariance(Ri, Rm) / Variance(Rm)
• CAPM = Rf + β(Rm – Rf)
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END OF FORMULA SHEET
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