List of 63 useful exam formulas for paper F9

As we all know , formulas are the mathematical expressions to

calculate values for different case scenarios. In ACCA paper f9, there are major some areas like Working
Capital Management, Business Valuation, Risk Management, Business Finance and Investment
appraisal which require , knowledge of formulas to calculate values and solution of the questions asked
in exams.
It means , remembering these formulas is vital in f9 studies. So considering the importance of these
formulas i tried to combine all formulas used in financial management paper here in this article after
spending a lot of time on going through books , notes and internet research.You can find below these
formulas under two headings 'Exam Formulas' and 'Formulas to Learn'.

Exam Formulas :
These formulas will be given on your exam question paper sheet , so you don,t need to
worry about remembering these mathematical expressions.

1- Economic Order Quantity = Square root 2CoD/Ch

2- Miller-Orr Model= Return Point = Lower limit + (1/3 * Spread )

3- Spread = 3 ( 3/4* transaction cost * variance of cash flows / interest rates )1/3

4- The Capital Asset Pricing Model = E(ri) =Rf + Bi (E (rm) - Rf)

5- The Asset Beta Formula = Ba = ( Ve / Ve+Vd (1-T) * Be ) + ( Vd (1-T)/ Ve+Vd(1-T) * Bd)

6- The Growth Model = Po = Do (1+g) / ( re - g )

7- Gordon,s Growth Approximation = g = bre

8- The Fisher Formula = ( 1+ i ) = ( 1 + r )( 1 + h )

9- Purchasing Power Parity = S1 = So * ( 1 + hc ) / ( 1+ hb )

10-Interest Rate Parity = Fo = So * ( 1 + ic ) / ( 1 + ib )

11-The Weighted Average Cost of Capital = WACC = ( Ve / Ve + Vd ) ke + ( Vd / Ve + Vd ) kd(1-T)

Formulas to Learn :
These formulas are not given on exam question paper . So guys you have to remember these
expressions to attempt an exam of F9.
1- ROCE = Profit before interest and tax / Capital employed
2- ROCE = Profit margin * Asset turnover
3- Gearing = Debt / Equity or Debt / Debt + Equity
4- Gearing = Prior Charge Capital / Equity capital ( including reserves )
5- Interest coverage = PBIT / Interest
6- Current ratio = Current assets / Current liabilities
7- Quick ratio = Current assets - Inventory / Current liabilities
8- Earning per share ( E. P. S ) = Profits distributable to ordinary shareholders ( Earnings ) / No. of
ordinary shares issued
9- Price Earnings Ratio ( P/E ) = Market price per share / E.P.S
10- Dividend Yield = Dividend per share / Market price per share * 100
11- Accounts payable period = Payables / Purchases or Cost of sales * 365 days
12- Accounts receivables days = Receivables / Credit sales * 365 days
13- Inventory days = Inventory / Cost of sales * 365 days
14- Inventory days = Finished goods / cost of sales * 365 days
15- Work in progress days ( W.I.P ) = Average W.I.P / Cost of sales * 365
16- Raw material days = Average raw material inventory / Annual raw material purchases * 365 days
17- Equivalent annual cost ( E.A.C ) = PV of cost over one replacement cycle / Annuity factor for the
number of years in the cycle

18- IRR = a + NPVa / NPVa - NPVb * ( b - a )

19- Cost of equity = Ke = D1 / Po + g
20- Cost of debt = Kd = i ( 1 - T ) / Po
21- Cost of preference shares = Kpref = Preference dividend / Market Value = d / Po
22- Profitability index ( P. I ) = PV of cash flows ( Without capital investment ) / Capital investment
23- Conversion value = Po ( 1 + g )^n * R Where ,
Po = Current share price , g = Annual growth in share price , R = No. of shares , n = No. of years
24- Ke = Dividend growth model = Do ( 1 + g ) / Po + g
25- Asset turnover = Sales / Total assets
26- Earnings per share = E.P.S = Earnings ( PAT ) / No . of ordinary shares
27- Earnings = E.P.S * No. of ordinary shares
28- Dividend cover = E.P.S / D.P.S = Earnings per share / Dividend per share
29- Inverse of dividend cover = 1 / P/E * Div. Yield
30- Dividend per share = E.P.S / Dividend cover
31- Nominal discount rate = 1+i = ( 1 + r ) ( 1 +h )
32- Operating gearing = Contribution / PBIT ( Operating profit )
33- Financial gearing = Debt / Debt + Equity
34- Operating profit = Profit from operations / Sales revenue
35- Net profit = Net profit / Net sales or Profit before tax / Sales
36- Return on Equity ( R.O.E ) = Profit after tax ( P.A.T ) / Equity
37- Minimum ( Buffer ) inventory level = Re-order level - ( Avg. usage * Ag. lead time )
38- Average inventory = Buffer or min. inventory level + Re-order quantity / 2
39- PBIT ( Operating profit ) = Interest cover * interest payable
40- Total shareholder return = ( P1 - Po ) + D1 / Po
41- Inventory = Inventory days * C.G.S / 365
42- Receivables = Receivable days * Credit sales / 365
43- Payables = Payable days * Credit purchases / 365
44- Annual discount cost = [{( 100 / 100 -d )^365/t } - 1 ] %

45- Overdraft = Total assets ( C.A + N.C.A ) - N.C.L ( O. S.C+ R.E + Long term loan ) - C. L ( Payables )
46- Assets = Liability + Capital
47- Total assets = Total liabilities + Capital ( Equity + O.S.C + R.E )
48- Cash operating cycle = Inventory + Payables - Receivables
49- Net working capital = Current assets - Current liabilities
50- TERP = No. of old shares * old share price + No. of new shares * New share price / Total no. of
shares ( old + new )
51- Value of rights = TERP - New share price
52- Net assets = Total assets( N.C.A+C.A ) - Total liabilities ( N.C.A+C.L ) - Preference shares