CFA CFA General Favourite Equation?

# Favourite Equation?

• Author
Posts
• 0

Over the past few weeks I have been giving a weekly training session to the younger support staff around financial accounts and their uses. Today we went through the basic financial ratios, and how they can be used to asses the various strengths/weaknesses of a company. Because i am a geek this got me thinking…what is your favourite equation?!?

Personally I love the 5-stage Du Pont analysis. I love how you can construct such a brilliant breakdown of ROE into the key constituent parts, and the best bit is you effectively do it by multiplying by ‘1’ several times over!

• 5

@hairyfairy exactly!

• Maroon5
Participant
• CFA Level 1
5

It’s the good ol’ dividend discount model for me. It’s simple, makes sense, I guess one of the basic valuation methodology. Forms a basis to all the different variations in cash flow definitions later on (FCFF, FCFE).

• 4

You’ll have to define the metrics to value a ‘favourite’ equation @MattJuniper… ðŸ˜€

• 4

Ha! I use a discounted ‘gets your rocks off’ method!

• hairyfairy
Participant
• Undecided
4

Every equation I can remember under pressure is my favourite equation. When I realise I KNOW which equation to use, and know which values from the equation fit where…That’s ecstasy!

• Snippy
Participant
• CFA Level 2
2

@hairyfairy Spot on!

• Reena
Participant
• CFA Charterholder
1

hmm… actually I like the derivatives part pay off calculations… perhaps not strictly formula per se, because that section makes sense with all those charts of payoff and I never have to remember much formula for them!

• tacheman
Participant
• CFA Charterholder
0

I like TVM equations. The idea of being to reach across time (or payments across time) and settle for an equivalent one-shot payment, either now, or at any point in time, is pretty awesome. ðŸ™‚