Quick Reference

Cheat Sheets & Revision Guides

Essential formulas, ratios, and key concepts organized by topic. Perfect for last-minute review before the exam.

Standard I(A)
Knowledge of the Law — comply with strictest applicable law
Standard I(B)
Independence & Objectivity — no gifts that could compromise judgment
Standard II(A)
Material Nonpublic Info — do not trade on or share MNPI
Standard III(A)
Loyalty, Prudence, Care — fiduciary duty to clients
Standard III(B)
Fair Dealing — treat all clients fairly in recommendations
Standard V(A)
Diligence — have reasonable basis for recommendations
Standard VI(B)
Priority of Transactions — clients before personal trades
GIPS
Time-weighted returns, all discretionary portfolios in composites, 5yr minimum
FV
PV x (1+r)^n
PV Annuity
PMT x [(1-(1+r)^-n) / r]
Perpetuity
PMT / r
EAR
(1 + r/m)^m - 1
CV
Standard Deviation / Mean — risk per unit of return
Z-score
(X - mean) / std dev
Bayes
P(A|B) = P(B|A) x P(A) / P(B)
Type I Error
Rejecting a true null hypothesis (false positive)
Type II Error
Failing to reject a false null (false negative)
Current Ratio
Current Assets / Current Liabilities
Quick Ratio
(Cash + Receivables + ST Investments) / Current Liabilities
ROE (DuPont)
Net Margin x Asset Turnover x Equity Multiplier
Debt/Equity
Total Debt / Total Equity
Inventory Turnover
COGS / Average Inventory
DSO
365 / Receivables Turnover
Basic EPS
(NI - Pref Div) / Wtd Avg Shares
FCFF
NI + NCC + Int(1-t) - FCInv - WCInv
LIFO vs FIFO
Rising prices: LIFO = lower NI, lower inventory, lower taxes
Bond Price
PV of coupons + PV of face value
Current Yield
Annual Coupon / Price
Modified Duration
MacDur / (1 + y/n) — % price change per 1% yield change
Price Change
-ModDur x Dy + 0.5 x Convexity x Dy^2
Duration Rules
Higher duration: longer maturity, lower coupon, lower yield
Callable Bond
Called when rates fall — limits upside for investor
Credit Spread
Bond Yield - Benchmark Yield — compensation for credit risk
Gordon Growth
V0 = D1 / (r - g)
Sustainable g
ROE x (1 - Payout Ratio)
P/E Ratio
Price / EPS — higher = higher growth expectations
EV/EBITDA
Enterprise Value / EBITDA — capital structure neutral
FCFE
NI + Dep - FCInv - WCInv + Net Borrowing
EMH Weak
Past prices reflected — technical analysis fails
EMH Semi-Strong
All public info reflected — fundamental analysis fails
NPV Rule
Accept if NPV > 0 (preferred method)
IRR Rule
Accept if IRR > cost of capital
WACC
(E/V)Re + (D/V)Rd(1-t)
CAPM
Re = Rf + Beta(Rm - Rf)
MM with Taxes
VL = VU + tD — debt adds value via tax shield
CCC
DOH + DSO - DPO
Forward Price
F0 = S0 x (1+r)^T
Call Payoff
max(0, ST - X)
Put Payoff
max(0, X - ST)
Put-Call Parity
C + PV(X) = P + S
Covered Call
Long stock + Short call — income strategy
Protective Put
Long stock + Long put — downside protection
Portfolio Return
Sum of (wi x Ri)
CAPM
E(Ri) = Rf + Bi(Rm - Rf)
Sharpe Ratio
(Rp - Rf) / sigma — reward per total risk
Treynor Ratio
(Rp - Rf) / Beta — reward per systematic risk
Jensen's Alpha
Rp - [Rf + Bp(Rm-Rf)] — excess return vs CAPM
Beta
Cov(Ri,Rm) / Var(Rm) — systematic risk measure
Diversification
Most effective when correlation is low/negative
Loss Aversion
Pain of loss > pleasure of equivalent gain