Professional Documents
Culture Documents
$ 1,000N d
2
rd =
N d + $ 1,000
2
r i=r d (1T )
I+
r p=
Dp
Np
rs =
D1
+g
P0
r r =r s
r n=
b (r mR F )
r s =RF +
D1
+g
Nn
r a= ( wi r i ) + ( w p r p ) +( ws r r n)
BP j=
AF j
wj
Definitions of Variables
AFi = amount of funds available
from financing source j at a given
cost
b = beta coefficient or a measure
of nondiversifiable
BPj = break point for financing
source j
D1 = per-share dividend expected
at the end of year 1
Dp = annual preferred stock
dividend (in dollars)
Inventory
Cost of Goods Sold per day
Cost of short-term financing + Cost of long-term financing Earnings on surplus balances = Total cost of aggressive
strategy
Mathematical Development of EOQ
Order cost = O x (S Q)
Carrying cost = C x (Q 2)
Total cost = [O x (S Q)] + [C x (Q 2)]
ECQ=
2 S Q
C
ACCOUNTS RECEIVABLE
Total variable cost
of annual sales
Average investment accounts receivable=
Turnover of
accounts receivable
Turnover of accounts receivable=
Average collection period=
365
Average collection period
Accounts Receivable
Sales per day
Payables
Payables
=
Purchases per day Cost of goods sold /365
CD
365
100 CD N
365
N
Discount
x
100Discount
365
Days credit is
outstanding
D iscount Period
Interest
Amount borrowed
Interest
Amount borrowed
Interest
Nominal Rate
DaysYear
Interest paid
Amount received/2
(Daysmonth)
( perRateday )( Amount
of loan )