IFSE Institute
Canadian Investment Funds Course – Formulas The following are formulas you must memorize for your exam: Note: The following is a study aid. It is NOT a complete list of what you need to know for your exam. You are responsible for all the material found in your online course.
Net Asset Value per Share (NAVPS):
Management Expense Ratio (MER):
Calculation of a Front-end Load:
Current yield for a bond:
Inflation rate:
Unemployment rate:
© 2009 IFSE Institute
1
IFSE Institute
Financial Ratios: Liquidity ratios: Working capital ratio (or current ratio):
Quick ratio (or acid test):
Book value per common share (BVPS):
Profitability ratios: Net profit margin:
Gross profit margin:
Operating profit margin:
Return on investment (ROI):
© 2009 IFSE Institute
2
IFSE Institute Return on common equity:
Earnings per common share (EPS):
Debt and equity ratios: Debt-equity ratio:
Interest coverage:
Preferred dividend coverage:
Market ratios: Price to earnings (P/E) Ratio:
Dividend yield:
© 2009 IFSE Institute
3
IFSE Institute Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA):
Total, Net, and Taxable Income: Total, Net, and Taxable Income Employment earnings + investment income + professional income + business income + all other income (i.e. WSIB benefits, social assistance payments, etc.) Total income - all deductions (RRSP contributions, childcare expense, etc.) Net income
- additional deductions (non-capital losses, social assistance payments, workers' compensation benefits) Taxable Income
Adjusted cost base (ACB): Purchase price + expenses incurred as part of the purchase Capital gain/loss: Proceeds of disposition – ACB – expenses incurred as part of the sale Year’s basic exemption (YBE) = $3,500 OAS Clawback: 15% of any amount over the yearly OAS clawback threshold, which you will be given. GIS Clawback: $1 for every $2 of your base income (excluding OAS income). Total RRSP contribution room for the year: © 2009 IFSE Institute
4
IFSE Institute 18% of your previous year's earned income up to the maximum contribution limit, adjusted for carry-forward contribution room and pension-related items, as outlined below:
Withholding tax for withdrawals from RRSPs: Withdrawal Amount
All provinces except Quebec
the first $5,000
10%
between $5,000 and $15,000
20%
amounts over $15,000
30%
Minimum withdrawal for a RRIF: 1 ÷ (90 – age). You do not need to memorize the RRIF schedule. You will also be expected to know the following: • • • • • • • • • • •
How to calculate ACB/unit after purchases, distributions, and switches Perform calculations using deferred sales charges How to calculate earned income for RRSPs What are qualified and non-qualified investments for RRSPs Whether options are in/out/at the money Basic calculations involving buying on margin Using exchange rates FINTRAC limits Accredited Investor amounts Homebuyers’ Plan (HBP) and Lifelong Learning Plan (LLP) limits and details RESP limits and CESG payment details
© 2009 IFSE Institute
5
IFSE Institute
Formulas you will be given. You are expected to know how to use them. Dividend gross-up and credit mechanism: It depends on which year the dividends are received. You will be provided with the gross-up and credit rates Quoted yield of a T-bill:
Purchase price of a T-bill:
Future value of an investment using Time Value of Money calculations:
Required rate of return:
© 2009 IFSE Institute
6
IFSE Institute
Expected total annual return:
Intrinsic value of a stock:
You do NOT need to know how to find: • •
The value of a perpetual bond The market value of a mortgage-backed security
You will also be given the following information as part of the question. • • • • • • • •
CPP contribution rates Year’s maximum pensionable earnings (YMPE) – although you must know the YBE CPP/OAS/GIS payment amounts OAS/GIS clawback thresholds – although you need to know how to calculate the clawback Federal/Provincial marginal tax rates Provincial dividend tax credits RRSP contribution limits Money purchase limits
© 2009 IFSE Institute
7
