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All Series 79 Formulas
Collection, Analysis and Evaluation of Data
20 items
Balance sheet identity (accounting equation)
, Assets = resources owned, Liabilities = obligations owed, Stockholders' Equity = residual owner claim
Asset turnover ratio
, Revenue = period sales; Average Total Assets = beginning plus ending total assets, divided by two; some texts use period-end total assets instead
Operating income
, SG&A = selling/general/admin overhead, D&A = depreciation and amortization
Gross profit
, Revenue = sales, COGS = cost of goods sold (direct cost of units sold)
DuPont identity (return on equity)
, NI = net income, Rev = revenue; terms are net margin, asset turnover, equity multiplier
Interest coverage (times-interest-earned) ratio
, EBIT = earnings before interest and taxes, Interest = interest expense; EBITDA variant reads higher
Quick (acid-test) ratio
or ; MS = marketable securities, AR = net receivables, CA = current assets, Inv = inventory, CL = current liabilities
Cash conversion cycle
, DSO = days sales outstanding, DIO = days inventory outstanding, DPO = days payables outstanding
Enterprise value bridge
, D = total debt, P = preferred stock, MI = minority interest, C = cash and equivalents
PEG ratio
, P/E = price-to-earnings ratio, g = expected earnings growth rate in percentage points
Implied enterprise value from peer multiple
, = target EBITDA
Market capitalization (equity value)
, P = price per share, S = common shares currently outstanding; using fully diluted shares instead gives fully diluted equity value
Terminal value (Gordon growth)
, = final-year free cash flow, g = long-run growth rate, WACC = weighted average cost of capital
Unlevered free cash flow
. EBIT: operating income; t: tax rate; D&A: depreciation & amortization; CapEx: capital expenditures; ΔNWC: operating net working capital change (excludes cash and equivalents, interest-bearing debt).
Weighted average cost of capital
, E = equity, D = debt, = cost of equity, = cost of debt, t = tax rate
Cost of equity (CAPM)
, = cost of equity, = risk-free rate, β = beta, = expected market return, = equity risk premium
Sum-of-the-parts equity value
; each segment i uses its own peer EV/EBITDA multiple; PV(Corp. Costs): capitalized value of corporate costs not in segment values.
LBO sponsor internal rate of return
, assuming no interim equity contributions or distributions; Exit Equity = exit EV − remaining net debt, Entry Equity = equity invested, n = years held
Gordon constant-growth dividend discount model price
, where ; = current dividend, g = growth rate, r = required return (needs r > g)
Economic profit
, NOPAT = net operating profit after tax, WACC = weighted average cost of capital
Underwriting, Offerings and Registration of Securities
9 items
Issuer net proceeds from an offering
, Net = issuer proceeds after underwriting spread but before other offering expenses, POP = public offering price per share, spread = gross spread per share, N = shares sold by the issuer
Gross spread (underwriting)
, MF = management fee, UF = underwriting fee, SC = selling concession (per share or total)
Greenshoe (over-allotment) option size
, G = maximum extra shares, N = base offering shares, 0.15 = 15% cap
Syndicate short-covering gain
, P = offering price, = market cover price, G = greenshoe shares covered
Gross spread per share
, s = spread per share, P = public offering price, g = gross spread percentage
Net proceeds to issuer per share
, = issuer proceeds per share after underwriting spread but before other offering expenses, P = offering price, s = gross spread per share
Rule 5122 maximum offering costs and sales compensation
, P = gross proceeds of a member private offering subject to Rule 5122; the limit covers offering costs, discounts, commissions and other cash or non-cash sales incentives combined
Rule 5122 minimum proceeds to disclosed business purpose
, P = gross offering proceeds of a member private placement
Rule 144 affiliate volume cap (maximum three-month sale)
Listed: ; OTC: . 3-mo. rolling total (not fixed 90d). SO: same-class shares out.; AWV: eligible avg wkly reported trade vol., 4 cal wks pre Form 144 filing or, if none required, sale order/direct execution.
Mergers and Acquisitions, Tender Offers and Financial Restructuring
9 items
Excess parachute payment under IRC Section 280G
pre reasonable-comp. adjustments if covered change-in-control payments' total PV . E/T: total excess/covered parachute payments; B: avg annualized includible compensation, prior 5 taxable years or shorter service period.
Section 4999 golden parachute excise tax
, E = excess parachute payment determined under Section 280G; for covered change-in-control payments, the trigger is aggregate present value of at least three times the base amount
New shares issued in a stock-financed deal
, P = total purchase price paid in stock, p = acquirer share price
Pro forma EPS in an all-stock acquisition
, = acquirer net income, = target net income, = acquirer shares, = new shares issued
Goodwill in purchase accounting
. 100% acquisition, no previously held interest; P: purchase price, FV of total consideration transferred; NIA: net identifiable assets, identifiable assets acquired less liabilities assumed; FV: fair value.
Pro forma combined earnings per share
, NI = net income, S = pre-tax synergies, t = tax rate, = incremental interest
Breakeven pre-tax synergy
, = pre-tax synergy to reach breakeven, t = tax rate, shares = pro forma share count
Exchange ratio in a stock deal
, multiply by target shares to get new shares issued
Creditor recovery rate in a liquidation waterfall
, amount paid = lesser of remaining proceeds available to the class and its total allowed claim; class claim = total allowed claim of that tier
Series 79 Limits and Thresholds
Collection, Analysis and Evaluation of Data
17 items
Form 8-K reports material events within 4 business days of the triggering event under Rules 13a-11/15d-11.
Interest coverage below roughly 1.5x to 2.0x leaves a thin margin for error in servicing debt.
The DuPont identity decomposes ROE into net margin × asset turnover × equity multiplier.
The cash conversion cycle equals DSO + DIO − DPO.
Net debt/EBITDA above roughly 4x to 5x signals aggressive leverage in most industries.
Long-run terminal growth g is often assumed to be roughly 2% to 3%, but must be below WACC and consistent with sustainable long-run economic growth.
Control premiums in acquisitions typically run 20% to 40% over the target's unaffected share price.
Financial (private equity) buyers typically exit in three to seven years and are disciplined by an IRR hurdle.
Terminal value often represents 60% to 80% of total DCF value, driving its sensitivity to WACC and g.
A REIT generally must distribute at least 90% of taxable income, excluding net capital gain, to qualify for REIT tax treatment; undistributed taxable income remains subject to entity-level tax.
An S corporation is limited to 100 shareholders and one class of stock; eligible shareholders include U.S. citizens or residents, estates, certain trusts, and certain tax-exempt organizations.
Rule 144A QIB: generally eligible institution owning and discretionarily investing ≥$100 million in unaffiliated issuers' securities. 3(c)(7) individual qualified purchaser: owns ≥$5 million in investments.
Under Rule 14d-9, a target's board must file its Schedule 14D-9 recommendation within ten business days.
SEC Rule 176 lists the factors for judging whether a defendant's investigation and belief were reasonable under Section 11.
Under SOX Title IV, Section 402 bars personal loans to executives, Section 403 requires insider transaction reporting, and Section 404 requires management's ICFR assessment.
SOX Section 403 accelerated insider trade disclosure, requiring insiders to report transactions within two business days.
Section 11 of the Securities Act of 1933 imposes liability for a materially false or misleading registration statement; defendants other than the issuer may establish a due-diligence defense.
Underwriting, Offerings and Registration of Securities
16 items
An emerging growth company has annual gross revenue below $1.235 billion; absent an earlier disqualifying event, status ends at fiscal-year end following the IPO's five-year anniversary.
Rule 163 allows WKSI offers before filing. Rule 163A generally shields issuer messages >30 days pre-filing that omit the offering; exclusions apply, plus reasonable steps against redistribution after the cutoff.
Rule 405 WKSI: ≥$700 million non-affiliate common-stock float, or ≥$1 billion of nonconvertible, non-common-equity securities issued for cash in registered primary offerings over prior 3 years; other eligibility rules apply.
Research safe harbors are Rule 137 (not in the deal), Rule 138 (different class), and Rule 139 (regular-course coverage).
Lock-up agreements commonly restrict insiders and the issuer from selling additional shares for 90 to 180 days after the offering.
Dealer aftermarket prospectus delivery: generally 40 days, or 90 days if no prior registered offering. Rule 174: listed IPO, 25 calendar days; already-reporting issuer, none. Rule 172 may meet eligible delivery duties.
Gross spread equals management fee plus underwriting fee plus selling concession.
Section 10(a)(3): a prospectus used over 9 months after effectiveness must have information dated no more than 16 months before use, insofar as known or furnishable without unreasonable effort or expense.
Reg M, absent exception: 1 business day before pricing if ADTV ≥$100,000 and public float ≥$25 million; else 5 business days before pricing. Later participation start controls; end at completion.
The greenshoe (over-allotment) option lets underwriters buy up to 15% more shares than the base deal to cover over-allotments.
Rule 104 permits stabilizing bids at or below the offering price, subject to its initiation and maintenance limits; the highest independent bid is not a universal ceiling.
Reg M Rule 101's actively traded exception needs ADTV ≥$1 million and public float ≥$150 million, if the security is not issued by the distribution participant or an affiliate. It does not exempt issuer buys under Rule 102.
Rule 144's holding period is 6 months once the issuer has reported for 90 days and 1 year otherwise, and Rule 5122 requires at least 85% of proceeds to fund the disclosed business purpose.
Rule 506(b) permits up to 35 non-accredited sophisticated purchasers in any 90-calendar-day period with no general solicitation, while Section 4(a)(5) caps accredited-only deals at $5 million.
FINRA Rule 11880: final syndicate-account settlement within 90 days of syndicate settlement date; corporate-debt offerings require ≥70% of each member's gross due paid within 30 days. Rule 4511 default retention: 6-year.
Regulation A allows Tier 1 to raise up to $20 million and Tier 2 up to $75 million in a 12-month period, versus Rule 504's $10 million cap.
Mergers and Acquisitions, Tender Offers and Financial Restructuring
16 items
An IRC Section 338(h)(10) election treats a legal stock purchase as an asset purchase for tax, giving the buyer a stepped-up basis.
Tax-free acquisitive reorganization generally needs stock consideration and continuity of interest. cash boot in otherwise qualifying deal generally triggers gain up to lesser of realized gain or boot received.
Golden parachute rules under IRC Sections 280G and 4999 impose a 20% excise tax once total change-of-control payments reach 3x the executive's base amount, taxing the excess over 1x base.
The Hart-Scott-Rodino Act requires pre-merger notification to the FTC and DOJ and a 30-day waiting period, shortened to 15 days for all-cash tender offers.
The exchange ratio equals offer price per target share divided by acquirer share price, setting the new shares issued in a stock deal.
In an all-stock deal before synergies and other deal adjustments, it is accretive when the acquirer's P/E exceeds the target's P/E at the offer price, breakeven when equal, and dilutive when lower.
If a fairness opinion will reach public shareholders, FINRA Rule 5150 requires disclosing contingent or success-based compensation and compensated material relationships with a deal party in the past two years or contemplated.
Under public-company U.S. GAAP, goodwill equals purchase price minus the fair value of net identifiable assets, and it is not amortized but tested annually for impairment.
Rule 14e-1: tender offer generally open ≥20 business days from commencement and ≥10 business days after notice of price or percentage-sought change. Periods may overlap; accepting ≤2% more of class is excepted.
Schedule TO is filed under Section 14(d)(1) by a third-party bidder and under Section 13(e)(1) by an issuer.
Regulation 14D applies to third-party tender offers once the bidder would hold more than 5% of a class of equity registered under Section 12.
Rule 13e-4 governs an issuer tender offer (buyback by tender) while Rule 13e-3 governs going-private transactions by the issuer or affiliates.
For a registered stock-for-stock business combination, a domestic corporate issuer generally uses Form S-4, while Regulation 14A governs an applicable proxy solicitation for the shareholder vote.
Rule 145 treats certain mergers and reclassifications as sales requiring registration unless an exemption applies, while Rules 165 and 425 govern pre-effective deal communications.
Bankruptcy waterfall: senior secured, then junior secured, paid from collateral by lien priority/value; then priority unsecured, general unsecured, subordinated unsecured, preferred, and common stock last.
A court-approved Section 363 sale can convey bankruptcy assets free and clear of liens if statutory conditions are met; a stalking-horse bidder may set the floor price before an auction.
