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144 Cards in this Set
- Front
- Back
Full price of a bond |
Full price = Clean price + Accrued interest |
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Duration |
-%change bond price/%change bond yield |
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Value of Callable Bond |
=Value of option free bond - Value of the call |
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TIPS coupon payment |
=Inflation adjusted Par Value X (Stated coupon rate/2) |
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Absolute Yield spread |
=Yield on bond with Higher yield - Yield on bond with lower yield |
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Relative Yield spread |
=(Higher yield/Lower yield)-1 |
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Yield Ratio |
=Higher yield/lower yield |
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After-tax yield |
=Taxable yield X (1-marginal tax rate) |
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Tax equivalent yield |
=Tax free yield/(1-Marginal tax rate) |
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Bond equivalent yield |
=[{(1+monthly CFY)^6}-1] X 2 |
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Spot rate at time 3 |
[(1 + one year forward rate at time 0)(1 + one year forward rate at time 1)(1 + one year forward rate at time 2)^1/3] - 1 |
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1 year forward rate at time 2 |
=[(Spot rate at time 3)^3 / (Spot rate at time 2)^2] - 1 |
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Effective Duration |
=(Bond price when yield falls - bond price when yield rise) / 2 X initial price X % change in yield as decimal |
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Percentage change in bond price |
=-effective duration X % change in yield |
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Portfolio duration |
=W1D1 X W2D2 X ... X WnDn |
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% change in bond price |
=Duration effect + convexity effect = [(-duration x change in yield)+ (convexity X change in yield^2)] X 100 |
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Price Value of basis point |
=duration X .0001 X bond value |
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Value of long FRA at settlement |
=notional principal X [(floating rate-forward rate)X(days to maturity/360) / (1 + floating rate)X(days to maturity/360) |
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Intrinsic value of Call and Put |
Call = max[0, S-X] |
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Option value |
=intrinsic value + time value |
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Lower/Upper bound European Call Option |
Lower = Max[0, S - (X/(1+RFR)^T-t] |
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Lower/Upper bound American Call Option |
Lower = Max[0, S - (X/(1+RFR)^T-t] |
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Lower/Upper bound European Put Option |
Lower = Max[0,(X/(1+RFR)^T-t) - S] |
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Lower/Upper bound American Put Option |
Lower = Max[0,(X - S)] |
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Put-Call Parity |
c + (X/(1+RFR)^T) = S + p |
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Net fixed rate payment on fixed/floating swap |
= (SWAP fixed rate - LIBOR) X (Days to maturity/360) X (Notional Principal) |
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WACC |
=Wd[(Kd)(1-t) + WpsKps + WeKe |
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CAPM (Ke) |
= RFR + B[(E(rm)-RFR] |
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Ke |
=CAPM or D1/P0 + g or Bond yield + Risk premium |
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RFRreal |
= [(1+RFRnominal)/(1+IP)]-1 |
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After tax cost of debt |
=Kd(1-t) |
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Cost of Preferred Stock (Kps) |
=Dps/Pnet |
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Correlation |
= Cov1,2/SD1 X SD2 |
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Total Risk |
=Systematic Risk + Unsystematic Risk |
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Beta (B) |
= Cov1,mkt/SDmkt^2 |
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Equation for CML |
=RFR + SDportfolio[(E(Rm)-RFR)/SDmarket] |
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Straight line depreciation |
=Cost-Salvage/useful life |
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Double Declining Balance Depreciation |
=(2/Useful life)(Cost-Accumulated depreciation) |
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Sum of Years Digits Depreciation |
Depreciation in year X = (original cost-salvage value)(n-x+1)/SYD |
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Free Cash flow |
=Operating Cashflow-Net Capital Expenditures |
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Common Size income statement ratios |
=Income statement account/Sales |
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Common Size Balance Sheet ratios |
=Balance Sheet account/Total Assets |
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Current Ratio |
=Current Assets/Current Liabilities |
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Quick Ratio |
=Current assets - inventories/Current Liabilities |
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Cash ratio |
=Cash + Mkt. Securities / current liabilities |
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Receivables Turnover |
=Net annual sales / Average Receivables |
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Average Receivables collection period |
=365 / Receivables turnover |
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Inventory Turnover |
=Cogs / Avg. Inventory |
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Average inventory processing period |
=365 / Inventory turnover |
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Payables turnover |
=Cogs / Avg. payables |
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Payables Payment period |
=365 / Payables turnover |
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Cash Conversion Cycle |
=(Avg. Rec. collection period) + (Avg. Inventory processing period) - (Payables payment period) |
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Total Asset Turnover |
=Net Sales / Avg. Total Assets |
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Fixed Asset Turnover |
=Net Sales / Avg. Fixed Assets |
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Equity Turnover |
=Net Sales / Avg. Equity |
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Gross Profit Margin |
=Gross Profit / Net Sales |
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Operating Profit Margin |
=Operating Profit / Net Sales |
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Net Profit Margin |
=Net Income / Net sales |
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Return on Total Capital |
=Net Income + Interest Exp. / Avg. Total Capital |
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Return on Total Equity |
=Net Income / Avg. Total Equity |
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Return on Common Equity |
=Net Income - Preferred Dividends / Avg. Common equity |
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Business Risk |
=SD of EBIT / Mean of EBIT |
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Debt to Equity Ratio |
=Total long term debt / Total Equity |
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Long Term Debt to Long Term Capital ratio |
=Total Long Term debt / Total long term capital |
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Total Debt Ratio |
=Current Liabilities + Long term debt / Total Debt + Total Equity |
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Interest Coverage AKA Times interest earned |
=EBIT / interest expense |
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Fixed Financial Cost Ratio |
=EBIT + ELIE / gross interest expense + ELIE |
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Cash flow coverage to fixed financial costs |
=CFO + Interest expense + ELIE / Interest Expense + ELIE |
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Cash flow to long term debt |
=CFO / BV long term debt + PV operating leases |
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Cash flow to total interest bearing debt |
=CFO / Total long term debt + current interest bearing liabilities |
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Original DuPont |
=Total Asset Turnover X Equity Multiplier X Net profit Margin |
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Extended DuPont (ROE) |
=[(EBIT/Sales)(Sales/Assets)-(Int. Exp/Assets)](assets/equity)(1-t) |
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Basic EPS |
=(Net Income - Preferred Dividend) / (Weighted Avg. # common shares outstanding) |
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Diluted EPS |
=(Net Income - Pref Div)+(Conv. Pref. Div.)+(Conv. Debt int.)(1-t) / (Weighted Avg. # Common)+(Conv. Pref Shares)+(Conv. debt shares)+(shares issued for Stock Options) |
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Ending Inventory |
=Begenning Inventory + Purchases - COGS |
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Current Cost of FIFO inventory |
=LIFO inventory + LIFO Reserve |
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FIFO COGS |
=LIFO COGS - (Ending LIFO Reserve - Beg. LIFO Reserve) |
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Average Age in years |
=Accumulated Depreciation / Depreciation Expense |
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Average Age as % (Relative Age) |
=Accumulated Depreciation / Ending Gross Investment |
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Average Depreciable Life |
=Ending Gross investment / Depreciation Expense |
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Income Tax Expense |
=Taxes Payable + (Change DTL - Change DTA) |
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Interest Expense |
=(Market rate @ issuance) X (Balance Sheet Value of Liability at begenning of period) |
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Nominal Risk Free Rate |
=Real Risk Free Rate + Expected inflation |
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Required Rate of return on a security |
=(Real Risk Free Rate + Expected inflation) + Default risk premium + Liquidity premium + Maturity Risk Premium |
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EAR |
=[(1 + Periodic Rate)^n] - 1 |
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Continuous EAR |
=(e^r)-1 |
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PV of Perpetuity |
=PMT / i |
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Future Value |
=PV(1+i)^n |
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Bank Discount Yield |
=(Face Value-Purchase Price/Face Value) X (360/t) |
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Holding Period Return (HPY) |
=(P1 - P0 + D1) / P0 |
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Effective Annual Yield (EAY) |
=[(1+HPY)^(365/t)]-1 |
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Money Market Yield |
=(360+BDY) / [360-(t X BDY)] |
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Geometric Mean |
=[(1+r1)(1+r2)...(1+rn)]^(1/n) |
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SemiVariance |
=Sum of (X-Avg)^2 / (#obs below Avg - 1) |
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Coefficient of Variation |
=SD of X / Mean of X |
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Sharpe Ratio |
=Rportfolio - RFR / SDportfolio |
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Excess Kurtosis |
=Sample kurtosis - 3 |
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Harmonic Mean |
= N / Sum(1/x) |
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Mean Absolute Deviation (MAD) |
= Sum |(X-obs)| / n |
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Joint Probability P(AB) |
=P(A|B) X P(B) |
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P(A or B) |
=P(A) + P(B) - P(AB) |
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nCr |
= n! / (n-r)! X r! |
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nPr |
= n! / (n-r)! |
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90%, 95%, 99% Confidence Intervals |
= 90% CI = -1.65 |
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Z score |
=Observation-population mean / Standard Deviation |
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SFRatio |
=E(rp)-RFR / SDmarket |
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Continuous compounded Rate of Return |
=ln(1+HPR) |
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Rate of inflation |
=CPI this year - CPI last year / CPI last year |
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Potential deposit expansion multiplier |
= 1 / Required reserve ratio |
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Potential increase in money supply |
= Potential deposit expansion multiplier X Increase in excess reserves |
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Equation of Exchange |
= Money Supply X Velocity = GDP = PRICE X Real Output |
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Price Elasticity of Demand |
= % change in Qunatity Demanded / % change in Price |
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Income Elasticity |
= % change in Quantity demanded / % change in income |
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Cost Minimizing condition |
= [(MP of A)/Price A] = [(MP of B)/Price B] = [(MP of C)/Price C] |
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Interest rate parity |
Forward(DC/FC) = Spot(DC/FC) X [(1+Rd)/(1+Rf)] |
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Annualized Forward discount or premium |
=[(forward rate/spot rate)-1] X (360/t) |
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Balance of Payment equation |
=Current Account + Financial Account + Reserve Account = 0 |
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Relative PPP |
=Expected future exchange rate = Spot Rate X [((1+inflation domestic)^t) / ((1+inflation foreign)^t)] |
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CF |
=Net income + Depreciation + Amortization |
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Adjusted CFO |
=CFO + [(net cash interest outflow)X(1-t)] |
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P/CF |
=Market price per share / CF per share |
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P/BV |
=Market price per share / BV per share |
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P/S |
=Market price per share / Sales per share |
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Short interest ratio (SIR) |
=Outstanding short interest / Avg daily volume on exchange |
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Uptick/downtick |
=# block uptick transactions / # block downtick transactions |
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Confidence Index (CI) |
=Quality bond yield / average bond yields |
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Smart money technician ratios |
Confidence index |
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Specialist short sales |
=Short sales by specialists / Total short sales on NYSE |
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Mutual fund ratio |
=Mutual fund cash / total fund assets |
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Contrarian technician ratios |
Mutual fund ratio |
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Investment advisor ratio |
=Bullish opinions / total opinions |
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Volume ratio |
=OTC volume / NYSE volume |
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Put call ratio |
=Puts/Calls |
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Expected growth rate (g) |
=Retention rate X ROE |
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Preferred stock valuation |
=Price at time 0 = Dps / Kps |
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One-period stock valuation |
=Price at time 0 = [(D1 / Ke) + (P1 / Ke)] |
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Infinite Period Stock valuation |
=Price at time 0 = D1 / (Ke - g) |
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Earnings Multiplier |
=P/E = (D1/E) / (Ke - g) |
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Negative Skew |
Tail points toward negative number/origin. If median is higher than mean, distribution is negatively skewed |
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Platykurtic |
Distribution with negative excess kurtosis |
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Bid-Ask spread percentage |
=(Ask-Bid / Ask) X 100 |
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Things to consider in determining DTL treated as equity |
1. Likelihood of reversal |
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Firms optimal Capital Structure |
Ratio fo debt and comm0n/preferred equity that creates lowest possible WACC and maximizes the value of the firms stock |
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Financial leverage multiplier |
=A/E |