Canadian Investment Funds Course – Formulas The …

1 IFSE Institute 2009 IFSE Institute 1 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: IFSE Institute 2009 IFSE Institute 2 Financial Ratios: Liquidity ratios: Working capital ratio (or current ratio): Quick ratio (or acid test): Book value per common share (BVPS).

2 Profitability ratios: Net profit margin: Gross profit margin: Operating profit margin: Return on Investment (ROI): IFSE Institute 2009 IFSE Institute 3 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: IFSE Institute 2009 IFSE Institute 4 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 ( WSIB benefits, social assistance payments, etc.)

3 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: IFSE Institute 2009 IFSE Institute 518% 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.

4 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)

5 Limits and details RESP limits and CESG payment details IFSE Institute 2009 IFSE Institute 6 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: IFSE Institute 2009 IFSE Institute 7 Expected total annual return: Intrinsic value of a stock: You do NOT need to know how to find.

6 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