NISM XV Notes by Subir Saha Linkedin

Subir saha
Important
Formula for NISM XV
Research Analyst NISM Serious XV
Should Read This Before You

Going To Exam Hall
Save This For Your Exam

Formula #1 Subir saha
Return on Equity (ROE)

Can 3 ways to Calculate
Explanation: ROE measures a company’s

profitability by showing how much profit is
generated with shareholders' money.
Formula:
Net Income
ROE = Shareholder’s Equity
EPS
=
Book Value
Net Profit
=
Book Value
× 100
You Can Use This Formula

Depending on the question,
Return on Capital Employed (ROCE)

Explanation: ROCE measures how efficiently a

company uses its capital to generate profits.
Formula:
Net Profit
ROCE = Equity + Debt
× 100
EPS
= Book Value
× 100
EBIT
= Capital Employed
Book Value (BV)

Explanation: Book value is the net asset value

of a company, giving investors an idea of the
actual value of the company’s assets.
Formula:
Assets - Liabilities
BV = Outstanding Shares
Equity + Reserve
= Outstanding Shares
Market Price
= Price to Book Value
Net Worth
= Outstanding Shares
Price-to-Earnings (P/E) Ratio

2 Way You Can Calculate
Explanation: P/E ratio measures how much

investors are willing to pay for each dollar of
earnings, showing valuation relative to
earnings.
Formula:
Market Price per Share

P/E = EPS
Market Capitalization
= Net Profit
Earnings Per Share (EPS)

Explanation: EPS indicates how much profit
each share of stock generates, showing
company profitability on a per-share basis.
Formula:
Net Profit
EPS = No. Of Outstanding Share
Formula #6
Price/Earnings to Growth (PEG) Ratio

Explanation: PEG adjusts the P/E ratio to
account for the company’s growth rate. A
PEG less than 1 could signal undervaluation.
P/E Ratio
PEG = Earning Growth Rate
Price-to-Book Value (P/BV) Ratio

Explanation: The P/BV ratio compares the
market price of a stock to its book value,
revealing how much investors value a
company’s assets.
Market Price per Share

P/BV =
Book Value Per Share
Formula #8
Earnings Yield (EY)
Explanation: It is the inverse of the P/E ratio,

indicating the percentage of each rupee
invested in the stock earned as profit.
EPS
EY = Market Price Per Share
× 100
Market Price (MP)

Explanation: The Current Value of Company
trading in the market.
MV = EPS × P/E
= LTP × No. Of Share
Formula #10
Compound Annual Growth Rate

(CAGR)
Explanation: CAGR represents the mean annual
growth rate of an investment over a specified
period longer than one year.
Gordon Growth Model

(Dividend Discount Model)
Explanation: Used to determine the intrinsic

value of a stock based on a series of future
dividends that grow at a constant rate.
Formula:
Dividend Yield
Explanation: This ratio tells investors how
much they are earning in dividends for every
rupee invested in the stock.
Formula:
Dividend Face Value

DPS = Declear / Of Per share
Dividend Payout Ratio

Explanation: This ratio indicates what
percentage of a company’s earnings are being
paid out as dividends to shareholders.
Formula:
Formula #14
Current Yield
Explanation: This is the return on a bond based
on its current price, indicating the yield that
investors can expect if they buy the bond at its
current market price.
Sharpe Ratio
Explanation: The Sharpe ratio measures the risk-
adjusted return of a portfolio, helping investors
understand how much excess return they are
getting for the volatility endured.
Formula #15
Treynor Ratio
Explanation: Similar to the Sharpe ratio, but it
uses beta (systematic risk) instead of total risk
(volatility), to measure the risk-adjusted return.
Enterprise Value (EV)

Explanation: EV is the total value of a company,
including its market cap (equity) and debt, while
subtracting cash. It gives a more comprehensive
picture of a company's value.
Formula:
Market Capitalization + Total Debt
EV =
− Cash and Cash Equivalents
Formula #17
Free Cash Flow (FCF)

Explanation: Free cash flow indicates how much
cash a company generates after accounting for
capital expenditures, showing its ability to fund
growth or return money to shareholders.
Operating Cash Flow−Capital

FCF =
Expenditures
Current Ratio
Explanation: The current ratio measures a
company’s ability to pay off its short-term liabilities
with its short-term assets. A ratio above 1 indicates
the company can cover its obligations, while a ratio
below 1 could indicate liquidity problems.
Formula #19
Quick Ratio (Acid-Test Ratio)

Explanation: This ratio is a more stringent test of
liquidity than the current ratio, as it excludes
inventory (which may not be easily converted to
cash). It focuses on the company’s ability to meet its
immediate obligations.
Cost of Equity (Ke)

Explanation: The cost of equity represents the
return that investors expect for taking on the
risk of investing in a company's equity. It is
calculated using the Capital Asset Pricing Model
(CAPM), where the risk-free rate is typically a
government bond yield, β (beta) is the stock’s
volatility relative to the market, and the market
risk premium is the excess return over the risk-
free rate.
Formula:
Free Cash Flow to Firm (FCFF)

Explanation: FCFF measures the amount of
cash generated by the company available to
all capital providers (both debt and equity
holders). It represents the cash available
before any debt repayments, making it useful
for evaluating the value of the entire firm.
Formula:
FCFF =
EBIT×(1−Tax Rate)
+Depreciation/Amortization
− Capital Expenditure
− Change in Working Capital
Free Cash Flow to Equity (FCFE)

Explanation: FCFE is the cash flow available
to equity shareholders after all expenses,
debts, and reinvestment needs are paid. It
indicates how much cash a company can
return to shareholders through dividends or
stock buybacks.
Formula:
FCFE =
Net Income + Depreciation/Amortization
− Capital Expenditure
− Change in Working Capital
+ Net Borrowing
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Subir saha

Research Analyst NISM Serious XV

Should Read This Before You

Save This For Your Exam

Return on Equity (ROE)

Explanation: ROE measures a company’s

You Can Use This Formula

Return on Capital Employed (ROCE)

Explanation: ROCE measures how efficiently a

Book Value (BV)

Explanation: Book value is the net asset value

Price-to-Earnings (P/E) Ratio

Explanation: P/E ratio measures how much

Market Price per Share

Earnings Per Share (EPS)

Price/Earnings to Growth (PEG) Ratio

Price-to-Book Value (P/BV) Ratio

Market Price per Share​

Earnings Yield (EY)

Explanation: It is the inverse of the P/E ratio,

Market Price (MP)

= LTP × No. Of Share

Compound Annual Growth Rate

Gordon Growth Model

Explanation: Used to determine the intrinsic

Dividend Face Value

Dividend Payout Ratio

Enterprise Value (EV)

Free Cash Flow (FCF)

Operating Cash Flow−Capital

Quick Ratio (Acid-Test Ratio)

Cost of Equity (Ke)

Free Cash Flow to Firm (FCFF)

Free Cash Flow to Equity (FCFE)

Subir saha Subir_finance

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