How do you calculate the Equivalent Rate?
1- Find effective rate
2- Change compounding, keep effective rate and find nominal rate
Simple or general annuity?
Simple: CY = PY
General: CY =/= PY
Two purposes of Amort table?
1- Break down payment into two parts, interest and pmt
2- obtain balance at given pmt
Amortization vs term
Amort: period of time required to pay loan in full
Term: Period of time during which a borrower pays a certain rate
NOI
PGI
EGI
Rent amount minus operating expenses (and related service incomes, if applicable)
Max amount of rent that can be collected if occupancy is 100%
Takes into account vacancy and bad debt rates
Return of shareholder’s equity
Profitability ↑
(net earnings after tax)/(shareholders’ equity) * 100
Net Profit Margin
Profitability ↑
(net earnings after tax)/(net sales) * 100
Gross Profit from sales margin
Profitability ↑
(Gross earnings)/(net sales) * 100
Operating margin
Profitability ↑
(EBIT)/(Net sales) * 100
operating efficiency
Profitability ↓
(Operating expenses)/(Net Sales) * 100
Return of total assets
Profitability ↑
(net earnings after tax)/(Total assets) * 100
Total assets turnover
Management ↑
Net sales/total assets
Accounts receivable recovery
Management ↓
Accounts receivable/Net sales * 365 days
Inventory turnover
Management ↓
Inventory/Net sales * 365 days
Fixed assets turnover
Management ↑
Net Sales/Net Fixed Assets
Accounts payable delay
Management ↑↓
Accounts Payable/(purchase of goods+Operating expenses (no depreciation) * 365 days
Financing ratio (leverage effect)
Financial Structure ↓
Total assets/Shareholders’ equity
Debt-to-equity ratio
Financial Structure ↓
Total liabilities/Shareholders’ equity
Debt-to-assets ratio
Financial Structure ↓
Total liabilities/Total assets * 100
Interest coverage ratio
Financial Structure ↑
EBIT/interest
Working capital ratio
Liquidity ↑
Current Assets/Current liabilities
Acid test or quick ratio
Liquidity ↑
(Current assets - (inventory+prepaid fees))/current liabilities
Defensive interval ratio
Liquidity ↑
Total annual expenses = Cost of sales + Operating expenses except amortization
Daily Operating costs = Total annual expenses/365 days
(Cash flow + Accounts receivable + Marketable securities)/Daily operating costs
Debt Coverage Ratios
Goal is to determine whether NOI is sufficient to cover annual debt service (ADS) of mortgage loan
DCR = NOI ÷ ADS(pmt*12months)
