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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, Total Assets = non-inventory assets + ending inventory
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
, CA = current assets, CL = current liabilities; inventory removed as slowest asset to convert to cash
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 = fully diluted shares outstanding
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 and amortization, CapEx = capital expenditures, ΔNWC = change in net working capital
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, (r_m − ) = equity risk premium
Sum-of-the-parts equity value
; each segment i valued on its own peer multiple
LBO sponsor internal rate of return
, Exit Equity = exit EV − remaining 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
, POP = public offering price per share, spread = gross spread per share, N = number of shares sold
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 net per share, P = offering price, s = gross spread per share
Rule 5122 maximum offering and organizational costs
, P = gross offering proceeds of a member private placement
Rule 5122 minimum proceeds to disclosed business purpose
, P = gross offering proceeds of a member private placement
Rule 144 affiliate volume cap (maximum 90-day sale)
, SO = total shares outstanding, AWV = average weekly reported trading volume over the 4 weeks before filing
Mergers and Acquisitions, Tender Offers and Financial Restructuring
9 items
Excess parachute payment under IRC Section 280G
, E = excess parachute payment, T = total change-of-control payment (only if T 3B), B = base amount (5-year average compensation)
Section 4999 golden parachute excise tax
, E = excess parachute payment (total payment minus 1x base amount), triggered once total reaches 3x base
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
, Purchase Price = equity price plus assumed net debt, 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 = proceeds remaining when the class is reached, class claim = total face 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 must stay at roughly 2% to 3%, no higher than long-run GDP 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 avoids entity-level tax as a pass-through if it distributes 90%+ of its taxable income.
An S corporation is limited to 100 shareholders and one class of stock, and only U.S. individuals may hold it.
A QIB owns $100 million+ in securities under Rule 144A, while a qualified purchaser owns $5 million+ in investments for 3(c)(7) funds.
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, defeated by the due-diligence defense.
Underwriting, Offerings and Registration of Securities
16 items
An emerging growth company has annual gross revenue below roughly $1.235 billion, and EGC status lasts up to five years after the IPO.
Rule 163 lets a WKSI make pre-filing offers, while Rule 163A is a 30-day pre-filing safe harbor open to any issuer.
Under Rule 405 a WKSI generally has at least $700 million non-affiliate common-equity float or issued $1 billion of non-convertible securities in the prior three years.
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.
Under Rule 174 the base dealer aftermarket prospectus-delivery period is 40 days, extended to 90 days for a true IPO with no prior reporting history.
Gross spread equals management fee plus underwriting fee plus selling concession.
Under Rule 427 a prospectus used more than 9 months after effectiveness must update so no information is older than 16 months.
Reg M Rule 101 sets a 1 business day restricted period when ADTV is at least $100,000 and float is at least $25 million, else 5 business days.
The greenshoe (over-allotment) option lets underwriters sell up to 15% more shares than the base deal.
Rule 104 permits a single stabilizing bid at or below the offering price and no higher than the highest independent bid.
Reg M's actively traded exception (no restricted period) applies when ADTV is at least $1 million and public float is at least $150 million.
Rule 144's holding period is 6 months for a reporting issuer and 1 year for a non-reporting issuer, 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 investors with no general solicitation, while Section 4(a)(5) caps accredited-only deals at $5 million.
FINRA Rule 11880 requires the syndicate manager to settle the syndicate account within 90 days of the syndicate settlement date, while Rule 4511 sets a default 6-year retention.
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.
A tax-free reorganization requires stock consideration plus continuity of interest, while cash consideration makes the sale immediately taxable to the seller.
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 with no synergies, it is accretive when the acquirer's P/E exceeds the target's, breakeven when equal, and dilutive when lower.
FINRA Rule 5150 requires disclosing contingent or success-based compensation and any material relationship with a party during the prior two years.
Goodwill equals purchase price minus the fair value of net identifiable assets, and it is not amortized but tested annually for impairment.
Under Rule 14e-1 a tender offer must stay open at least 20 business days, plus 10 additional business days after any change in price or percentage sought.
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.
Securities issued in a stock-for-stock business combination register on Form S-4, while Regulation 14A governs the proxy solicitation for the shareholder vote.
Rule 145 treats certain mergers and reclassifications as sales requiring registration, while Rules 165 and 425 govern pre-effective deal communications.
The bankruptcy claim waterfall pays senior secured, then junior secured, then unsecured, then mezzanine, preferred, and common stock last.
A Section 363 sale sells bankruptcy assets free and clear of liens, with a stalking-horse bidder setting the floor price before a court auction.
