McGraw-Hill’s Financial Analyst

The power of MathSoft's Mathcad engine has been added to the 201 top financial toolscontained in the best-selling McGraw-Hill's Pocket Guide to Business Finance. The result isa powerful, easy to use and elegantly interactive business finance software tool. Just plug inyour own figures and watch the Financial Analyst calculate cash flow, profit margin, returnon investment and sales variances. There are close to 200 additional analyses as well. Youcan even incorporate data from your favorite Windows spreadsheet programs to make betterinformed financial decisions.

Platform: WindowsRequires: 4 MB hard disk space; includes the Mathcad EngineAvailable for ground shipment

Topics include: Corporate Finance, Investment Management, Budgeting, Inventory Control,AccountsPayable, Ratios, Bond Yield, Cost of Capital, Foreign Exchange Gains and Losses, and more.

Compute the annualpercentage of offering 2/10,net/30 trade discount on aparticular amount to seethe cost benefit to you.

McGraw-Hill’s Financial Analyst

Accounts Payable RatiosAccounts Receivable ManagementAccounts Receivable RatiosAcid-Test (Quick) RatioActual Cash ValueAdjusted Gross IncomeAlpha ValueAmortized LoanAnnual Percentage RateApplied (Predetermined) Overhead RateArbitrageArithmetic Average ReturnAsset Utilization (Turnover)Audit Fees to SalesAverage (Arithmetic Mean)Bad-Debt RatiosBank ReconciliationBarron's Confidence IndexBetaBlack-Scholes Option-Pricing ModelBond ValuationBond YieldBook Value per ShareBreadth IndexBreakeven FormulasCapital-Asset Pricing ModelCapitalization RateCash Flow RatiosCash-Management ModelsCash Plus Cash Equivalents to Working CapitalCash RatiosCertainty-Equivalent Approachc2 (Chi-Square) TestCoefficient of VariationCommon-Stock ValuationContribution MarginControllable (Budget, Spending) VarianceConversion RatioCorporate Planning ModelsCorrelation AnalysisCost of Capital

TABLE OF CONTENTS (page 1 of 5)

McGraw-Hill’s Financial Analyst

Cost of CreditCost of Prediction ErrorsCredit Cost on Installment PurchasesCurrent-Liability RatiosCurrent RatioDecision MatrixDecision TreeDecomposition of Time SeriesDefensive Interval RatioDeposits Times Capital RatioDepreciation FormulasDirect Costs-to-Sales RatiosDiscretionary-Cost RatiosDividend RatiosDollar-Cost AveragingDu Pont FormulasEarnings per ShareEBIT-EPS Approach to Capital StructureEconomic Order QuantityEconomic Production Run SizeEffective Annual YieldEffective Interest RateEffective Tax RateElasticity of DemandEquity RatiosEquivalent Taxable YieldEstimated Expenses versus Cash ExpensesExpected Value and Standard DeviationExponential SmoothingFixed-Asset RatiosFixed-Charge CoverageFlexible-Budget VarianceForeign-Exchange Gains and LossesForward Premium (or Discount) on a Forward Exchange ContractFunded-Debt (Long-Term Debt) to Operating PropertyFunds-Flow Adequacy RatioFuture (Compound) ValueFuture Value of an AnnuityGeometric Average ReturnGordon's Dividend Growth ModelGross Income MultiplierGross Profit VarianceGrowth Rate

TABLE OF CONTENTS (page 2 of 5)

McGraw-Hill’s Financial Analyst

High-Low MethodHolding-Period ReturnHorizontal AnalysisHousing-Affordability MeasuresIndex-Number Trend SeriesIndex of Bearish SentimentIndirect Labor to Direct LaborInflation AdjustmentsInstability Index in EarningsInsurance ReimbursementInterest ComputationInterest Coverage (Times Interest Earned) RatioInterest-Rate SwapsInternal Rate of Return (Time-Adjusted Rate of Return)Intrayear CompoundingInventory RatiosInvestment Income to InvestmentsInvestment TurnoverLawsuit Damages to SalesLearning CurveLeast-Squares RegressionLeverage Ratios and Financial LeverageLife Insurance AdequacyLinear ProgrammingLiquid Assets to Take-Home PayLiquidity IndexLoan-Loss Coverage RatioLoans and DepositsMaintenance and Repair IndexMargin RequirementMarginal Cost and Marginal RevenueMarket-Index ModelMateriality of OptionsMedianMix and Yield VariancesModeMoving AverageMultiple RegressionMultiple-Regression TestsNaive Forecasting ModelsNet Asset ValueNet-Cost Method

TABLE OF CONTENTS (page 3 of 5)

McGraw-Hill’s Financial Analyst

Net Income MultiplierNet SavingsNet WorthNoncurrent Assets to Noncurrent LiabilitiesNormal DistributionOdd-Lot IndexOff-Balance-Sheet Assets and LiabilitiesOperating Assets RatioOperating CycleOperating LeverageOperating Revenue-to-Operating Property RatioOpportunity CostOpportunity Cost of Not Taking a DiscountPayback PeriodPension FormulasPercent Earned on Operating PropertyPercent-of-Sales Method for Financial ForecastingPersonal Debt and Personal AssetsPortfolio TheoryPreferred Stock to Total Stockholders' EquityPresent ValuePresent Value of an Annuity"Pressing" Current Liabilities to "Patient" Current LiabilitiesPrice-to-Book Value RatioPrice-Earnings Ratio (Multiple)Price (Rate, Spending) VarianceProfit MarginProfitability IndexProgram Evaluation and Review Technique (PERT)Quality of EarningsQuantity Discount Model (EOQ with Quantity Discounts)Quantity (Usage, Efficiency) VarianceRealization Risk in AssetsRegression StatisticsReorder PointRepairs and Maintenance RatiosResidual IncomeReturn on Total AssetsRisk-Adjusted Discount RateRisk MeasuresRule of 72 and Rule of 69Rule of 78

TABLE OF CONTENTS (page 4 of 5)

McGraw-Hill’s Financial Analyst

Safety StockSales-Mix AnalysisSales Returns and Allowances to SalesSales to Current AssetsSales to Current DebtSales to PersonnelSales VariancesSalesperson VariancesSavings to IncomeSelling Price ComputationShadow PriceSimple InterestSimple (Accounting) Rate of ReturnSimple RegressionSimulation ModelSinking Fund ComputationSystematic-Sampling FormulaTake-Home Pay to Debt-Service ChargesTaxable IncomeTrading on the Equity (Real Estate)Trend EquationValuation of a BusinessValue of Option (Call and Put)Value of Stock RightsVariable Costs to Fixed CostsVertical (Common-Size) AnalysisVolume (Denominator) VarianceWarehouse Cost VariancesWeighted Average (Mean)Wilcox's Gambler's-Ruin Prediction FormulaWorking CapitalYield on Preferred StockZ-Score Model: Forecasting Business Failures

TABLE OF CONTENTS (page 5 of 5)

McGraw-Hill’s Financial Analyst

Moving Average

Definition

A moving average is an average that is updated as new information is received. Forexample, a financial manager employs the most recent observations to calculate an average,which is used as the forecast for the next period.

How is it Computed?

For a moving average, simply take the most recent observations to calculate an average,and update these observations continually as new data becomes available.

Example

Assume that a financial manager has the following cash inflow data:

Month Cash collectionsApril $20,000May 21,000June 24,000July 22,000August 26,000September 25,000

Using a five-month moving average, predicted cash collection for October is computed asfollows:

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McGraw-Hill’s Financial Analyst

How is it Used and Applied?

The moving average is used as a prediction model. Forecasters can choose the number ofperiods to use on the basis of the relative importance attached to old data versus currentdata. For example, compare two possibilities -- a five-month and three-month period. Interms of the relative importance of new-versus-old data, the old data receives a weight of4/5 and current data a weight of 1/5. In the second possibility, the old data receives aweight of 2/3, while current observations receive 1/3 weight. This example is a special caseof the exponential smoothing method, in which a smoothing constant represents the weightgiven to the most recent data (see 70 Exponential Smoothing).

Moving Average Worksheet

Input Variables

Number of data points:

Number of data points to be used in moving average:

Calculations

Therefore, the moving average is

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