Bosics of AFM Sasies ot: OEE + +r tr z Ratio Inher pretation Tntexpretahin of Basic Time Value Analysis of Dividend Trrterest Rate Mocthemahics of Money Ratio Analysis ©) Imcame Statement [for APM Puspose Ont Sales CD Comms Caves Profit | Gravss Income | Gravee Margin (29 Operohing Expentes [Eg: Admin. SeUking & Dishibution Expense} ELT [POLT | Operatieg trvbt | Opewatiy, Treeme | Operatigg Margin (9 Lakers} Expenue ERT | PRT | Taxable ‘Imeeme (> Tax EAT [PAT | Nek Profit | Net Truame | Net Margin C) Dividend on Pretewence Shawes EATESH [Eomings Mvailable te Equshy Grawshaldens] © Dividend om Equity Lharer Retained Earmmgs | Undichibuted ProfitsBasics of AFM i (2D Bolance Sheet [For AFM Puspore Only] = Equity & obi lhes Assets Share Capital [ Always Assume it as pay] Fixed Assets Srawe Copied in AEM Corerent Assets Resewes & Swaplus Predioninary Expenses Debt [Eg: Dederteves, Bends, Benowings, Loan, ek) Curent Liobilthies (Eg: Creditors, Provisions, ek) (3d Torok Assets = | Fixed Assets + Current Assets QD) Torok Leabilities = Debt + Cawvent Leabi lites (5D Working Capital = Carvent Assete - Curswent Liaboi ihes (6) Ned Worth | Bick Value | Shaseholders ands \ Cqusty > Shows Capital + Resewver 2 Surplur - Preliminany Expenses oR TTotoh Assets - Took Leabiliher (7) Capitol Employed > Brave Capital + Resewves & Sumplus + Debt - Preliminary Expene OR Ey + Debt oR Tokok Assets - Cuvvent Liabilihes CONC ees meres : x\00 Sales $ (@) Coms Roto = ae x)00 loot, - GP Rahs aun E T led Opewrtg Prokit Ratio of Opecading Mangin Rabie = es a x loo CA Ces)Basics of AFM = (8 Operating Ratio = CONS + Operating Expenses Sales ool ~ Opersating Profit Rabo cad Nek Paokt Ratio 2 Net Peotit Tas X00 (a) Debt Rocko av Deb ty Capital Emplyed Raho =< —— Debt Cqucky + Debt Wd Equi, Radio ov Equity to Capita Cmplyed Rebs = — SOM Equidy + Debh Debt Eyity Sales [Tumover] Raseks * U5) Deb Equity Rodio = (6d Assets Turnover Ratio = joo Sales a Fs Assets Termover Raho 2 —S*** _ v xed seks ° Fitea Mists * CBD Curves Assets Turnover Raho pa Sales ioe Current Mascots (49 Laventoay Temover Ratio = aie Rise (20d Debus Temover Ratio = Covet Soles oe lary Asters to Salen Radio = ASH 156 Sales (2X Tnberest Coverage Ratio = sr [pighes abe Seter] Cae eles)Basics of AFM (asd Tnterest & Fixed Dividend Coernge Rebvo PAT 4 Inkevest Lnrevess + Preference Dividend [ghes he Better] D. Preference Shave Capi (> Capitah Greasing Ratio = Debt_+ Preference Shave Gyital Eqidy Shove Copthal + RAE [Lever athe Rete) EATESH (asd Earnings Pew Shore [Bes] = No. of Equity Shares , vided on pe Shave. [nd Dividend Per Ghave [prs] = Dvterd on Eythy Shaves No- of Equcly Shaves Rook Value 2 Jolue Pew awe [RVPS) = ———————__ tao Book Value Pew Shave [BveS) = TO Sa are (28) Markel Price Pew Ghawe [MP] = Marked Paco f Equity Ghare Dindend on ua are. (18 Dividend Pogoud Ratio = DAs Equity Shaves too EATESH (eR) Des x 100 eps ay ton", - Retention Ratio Lami: [sod Retention Ratvo = Retained Earnings 6, EATE SH loo". - Dividend Payout Raho OPS MPS GY Dividend Yield x 00Basics of AFM EBLT rol Emplayed [Roce] = —————— x (2) Retuen on Capital Empleye Roce] Capital Emplaged = (929 Redan on Equity [Roe] - _EATESH Net Westh [Bask Value) ea) EPs X 100 BvPS (84) PIE Rado = MPS EPS Note: Sometimes ROE is coleulated on Market Price ce. ROE = see ‘ Pence, PIE Rates = Rog (5) Marked Capitohisation 9 Total Market Value ot Equity Shorehaiess = MPS x No. of Equity Shaves (x) PIE RoW x EATESH Interpretation of Dividend GO Dindend 3 Ow Face Yolue (ap Dividend Yield 3 On Macket Price (a) Dividend Payot 2 On Eaonings Interpretation ot Interest Rate UD (Oo Boris Points [Be] = 1h (2) Twkerest Rate given in question will alvonye be assumed as few mnum fp’) unless speciteally, emerbionea. CA AJAY AGARWAL (AIR 1)Basics of AFM seria Go Tnbevere Rote in 10’ 3 po Gin Takewesk Rete for 6 ments Bemmuing: is loth S pia Lis 6 Months LT BOR is 10% 3 Pa (vd Lakevest Rate is Ih pew mow = pom [per Monin] ve Mathemahes (19 Letemetionak Number Aycten = | Milken = 1D Lakh = (,200,000 1 Bien = 100 wre = 1,000,000,000 (> Equaion Solung = eyez x-yer ie a Se we wee 2ty % = 2Ky (2) Converting Deka nto fertent (ih) ov Bask to Nennal = Exomple: Marks Obbained in Exams = 24 Telok Maks = 30 Mosks obtarned in velahin to Totoh Maaky = - 0-80 Convert i into % by Multiplying # by too = 24 xia = sox Now, To Remeve Te from Any figuee , Divide A by too ‘ Bo Example: 80% > TE> > Oboe WD Some Mothemadiiad Nobatiens + ase with Power [Base 2e”] Example Gj) > bxexbxs + 12% (AIR 1) rs | RacBasics of AFM + Base with Negative Power [Bare Motte Bue Exommple > wo a(S) 3 rae To 7 vaag 7 Cote ttle + Square wot LJ Example: JBE > (35% (9) Solving Base with Powes Using Calealater = + Nowmol Power [Lxample 9 I"): reps 40 Solve Aus on coboulatrr > Type Bose im Caleulatrr [Example > 4] > Press Mulriply (x) Buthm > Now, Press Equals to C2) Button fox CPower =") Times [Example 9 4-1-3) Div Power [Example 36) % on (69° a}: Step do solve Hus on caluslator > Type Base in Colenlaror [Example 9 ¢] > Press Undewot CF) Button 12 Ames Sublsodk > 1 from i Malhply GO i by Power [exemple 3 2 on 0-20) Add GD 2 te Press Multiply Equals da (x=) Baten 12 Hees (6) RODMAS Rule: + Tr Aelly the sequence in which mathemahiah operodons ave wequivad te be performed do solve an equnhim, Cees)Basics of AFM + Sequence it as follows 5 B= Bracket amd yo = Orders [ie: Pores or Under] gto Ds Dude wh eM sh aA Math ply Add oH eg = Subbod Example Bx 64 +2 (a-uy™ > 3x let4 +r «GD S354 +2xK95 > 3x4 + 2K28 a> 12%+ SO 3 6d (2) Addition, bubbrachion, Maltiplication oy Division ct figures with Minus Sign Exomple 2 543 28 wi 5+ C8) = S-3 = 2 Go 5+ CY 5 5-7 2-4 go -5-3 = 7-8 ow -s+ta>= 7 b-3 = -8 oo Sx (3) = 715 wid ESD x CD = 15 ows =o ala & waBasics of AFM Time Value of Money GQ) Ficduwe Value = Present Value (1+R)* oR Cosh Flow x FY Fy Heve, pyc. = (4 ay Example? Paimeipah Amount to be Invested = £ (p00 ; Latewest Robe is 10% Gy C\eslavon of Frhuve Value offer 4 Year > 1900 « ( 10)! = EF [loo Gin Coleaodion of Rituve Value abter 2 Yews 2 100 * (evo = e210 Mids Coleabolion ot Lahure Valac afer 3 ean 3 1900 x (mio)P = € 1321 Vali (2) Present Value (PV) = Fahure Value G+ ay oR Cash Flow, % PVF, Hewes oye, = us + Th (a a Paveets which discounts future cash Plouss se. Pevocaas of Removing Tateweak | Reduen Component from -fehare cade Flow. Example Inked Rate is 10% G> Coleulahion of PV if fictse Value after L Year i € 1100 Woo ALES oR 00 x 0-409 > L000 (ey ’ (are Cie OR 1210 x 0.g04 GO Colustoheon of PV if Reuse Value after 2 Years it E210 D> EF looo TENBasics of AFM Cid Coleulohion of PV if Fetae Value after 3 Years it F133) 33) oR Gey 1321 x0.F51 2 El p0o Caluslation of Present Value in Various Seenames tia TH theve ia Uneven Cash Flow for Limited Peaiod PY. = Cosh Flow, x PVF, + Cash Flo, x PVE, £..., Coch Flow, x PVF, ok Tr com be caleulated using fallourng Table Prenat Year Cosh Flow BF @ Diseountigg Rate Py. w ory (=>) CH) = Dx (3) ‘eos Cosh Flo PVE @ 10°, Pv \ \ec0 © 409 409 2 1800 0-826 1284 3 B00 o-%5) 600-3 Pes 2948-80 : Go TH theve is Even Gah tlow few Limited Peaiod Pv. = Even Geh flow x PVAF Hew, pyag = Present Value Annuity Foch Exomple “Cosh Flow of © (900 usl\ be weceied ak end of cach yew for 3 Nears, Discouwhng Rote is 10%. Calualate PY PN. = loo x PVAT, = 1000 X2-4BE DS T 2Hasies OF AEM E Gin Th reve ie Peapeduah Cash Flow fie: Gah Floo Brever| Reapehual Cosh Flos Discounting Rate Example: PY. s Cash Flow of £ 1000 wdll be vecaived ot the end & cock year Forever, Diseounbiry Rabe is 10%, Galewlahe PV 7 Ipoe PN = = £ 10,000 lok Gia TH theve ic Pewpetuah Cosh Flow sith Constant Choowth Rate [ie Gash Flow csith Consbort Groth} Diseounhiog Rate - Crrousth Rete Exoonple! Cash Flow of & O00 will de veenied ot HY yeay end & Mreveathes ot uill grow by 2k pa. forever Discounting Rabe rel Coluslote PV. lps Ipco = UPR = £12500 lor, -2"h Bl, . (0) LE Ahewe ig Uneven Gah Flow fer Limited Pesiod 2, theveatter Pewpeduod Cash Flos PV is caluslated as follows « PY of Uneven Gib Flows for Limited Resin [laladated using PY Tee} Ga PV of Pewpedual Gsh Flow [Teamins Valuey, yy % PY Fal v Pye we CA AJAY AGARWAL (AIR 1)Basics of AFM Pe apetuod f Rew, Teaminal Value aay > epee Go Tee isco v mals Ths Volue evil be of A Nene Refswe the Date om whith Peapedual Gah Flows evi lt shawt vrei ve. Exonnple ; Jeon Cote £ lous ' 1oc0 2000 \ Disevete Valuer 5,000 Fusthes, Cash Flow of £ 7,000 uill be received ab each year end From 4 yeas da onwards. Oiseoumbryy Rote ia 10% Crludare PY Calusladion of Pv PV ef Uneven Gah Flo Year Cash Flow PVE @® lon ev \ 1900 e404 404 oo) 0-826 Ves2 $ S008 oF Bts5 PY of Perpetual Gh filo Breer sleet (pn reas eget ett eames lof, io% PV. of TVz = Fop00 x o.4s1 5 E5260 Total PV. = 6816 + SLStO DV SB aa¢Basics of AFM (vy) LE there ig Ureven Guth Flow fy Limited fested 2, theveater Peapeducd Cash Flew with Constant Gyeouth PV is caleslated as follows. PY of Uneven Gath flow for Limited Rewind [talealahed using PV atte] v (4d PY of Pewperual Gash Flows [Teamind Yaluey iy x ysl ov Prva Here, Teeminal Value (yr = Firat Peapod Gath Flow. Disceuming Rate - Growth Rake Ths Value onll be ok A Near Belme the Date on whith Perpetual Gsh Flows esl stavt te eumive % Frust Peapetul Cash Flow, = Cash Fle ig * (reg) Exormple: Yeo Cad F loss \ lo00 2 2200 fos Valuer 3 5,000 Fusther, Cash Flow From 4 Yeax & Onwards ol ll grow ot 2°, pa Fovever, Disemunbing Rate is 10%, Caludate PV Coleslahion of Pv: PY ek Uneven Gath Flo Year Cash Flow PVF @ lor o 1990 2404 % 2900 3 R26 Sooo o* CA AJAY AGARWAL (AIR 1)a Ot PY of Pewperuah Gash Flor Fewminal Value (TV, | CE, (149) | Som (140.02) eh aL > 63450 Pv. of TV, = 68750 x 0-451 > F 4RErE Tetol Pv. = 6816 + 44BF6 > ZV SxVAD Nokes PV factor [PVF] shold alway: be taken in S decimal: unless spe ctheally mentioned in question