 # Not able to remember formulas/concepts? Write down all the formulae and concepts you want to remember here!

Hello friends, Please post all you want to remember here… it’ll be our repository before asking any basic questions and whenever we get stuck.

1. FIFO net income - LIFO net income = (change in LIFO reserve)(1 - t) 2. LIFO COGS - FIFO COGS = change in LIFO reserve 3. FIFO inventory - LIFO inventory = LIFO reserve Everyone is welcome to pitch in and point out any errors too.

Thanks anupamjain2008! Formulas from Econ: • Price Elasticity of Demand = % change in qty demanded / % change in price % change = Change in Val. / Avg. Val. = (End. Val. – Beg. Val.) / {(End. Val + Beg. Val)/2} • Cross-Elasticity of Demand = % change in qty demanded / % change in price of substitution or complementary goods or services • Income-Elasticity of Demand = % change in qty demanded / % change in Income • Normal goods: Elasticity between 0 & 1 = Necessities Elasticity > 1 = Luxury goods • Price Elasticity of Supply = % change in qty supplied / % change in price • Opportunity Costs = Total explicit costs + Total implicit costs (including normal profit) • Economic Profit = Total Revenue – Total Costs (or opportunity costs) • Four-firm concentration = % of total industry sales made by the 4 largest firms in the industry • Herfindahl-Hirschman Index = Sum the squared % market shares of 50 largest firms (or less in case of less than 50 firms) • Marginal Cost = Change in Total Cost / Change in Qty • Average Total Cost = Avg. fixed cost + Avg. var. cost [Also, TC/Q = TFC/Q + TVC/Q] • Unemployment Rate = (No. of unemployed / Labor Force) x 100 • Labor-force Participation Rate = (Labor Force / Working-age Population) x 100 • Employment-to-Population Ratio = (No. of employed / Working-age Population) x 100 • Consumer Price Index (CPI) = (Cost of basket at current prices / Cost of basket at base period prices) x 100 • Inflation Rate = {(Current CPI – Year ago CPI) / Year-ago CPI} x 100 Or Annual Infl. Rate = {(Current price level – Year ago price level) / Year-ago price level} x 100 • Aggregate Demand = Consumption + Investment + Government Spending + Net Exports = C+I+G+X (Net Exports = Exports – Imports) • Money-multiplier = (1 + c) / (r + c) [c = Currency as a % of deposits; r = Required reserve ratio] • Change in qty of money = Change in monetary base x Money-multiplier • (Money Supply x Velocity) = GDP = (Price x Real-output) [MV = GDP = PY] ; [MV = PY] ; [P = MV/Y] ; [V = GDP/M] • Nominal risk-free interest rate = Real risk-free interest rate + Expected inflation

1. for short: Margin Call × (1 + maintenance margin) = (original price) × (1 + initial margin) 2. for long: Margin Call × (1 - maintenance margin) = (original price) × (1 - initial margin)

Since I am hearing that the test is more conceptual, I was wondering how critical is to memorise the forumlae? S

Is it true? Because there were lot of questions involving calculations in the CFAI sample test and Schweser mock tests that I took. Seniors/Experts please share your opinion on how critical it is to memorise the formulae!

rather than blind memorization, I would suggest understand the applicability of the formula to particular situations, while you solve problems. While the above list for Economics is very commendable, from my experience - the only two formulae that were applicable in the Dec 2007 exam corresponded to Price elasticity of demand, and to calculating the FX conversion (which chapter is no longer in the 2008 syllabus). Almost all else in Economics was understanding relationships between variables, without use of formulae, entirely conceptual stuff. That is my 2c. CP

I think you need to memorize the large chunk of the formulas. At least the really important ones. I took a mock exam (and review) through Stalla this past weekend and did poorly because I forgot the large majority of formulas. The test wasn’t that difficult and it was frustrating knowing that I knew how to do the problems but went blank on the mock exam. On of my teachers for the Stalla class suggested writing down the formula first thing after reading the question and then going from there. Sounds like a good idea. Just wish I had remembered them. It will definitely take some time and won’t happen over night. The formula list idea for this thread was a good one. Thanks.

These are only those formulae that I find difficult to remember, this is not a comprehensive list of general formulae. It’ll serve as an aid to remember those. Here are some more: 1. Country Risk Premium = Sovereign yield spread (Annualized STD of index / Annualized STD of sovereign bond market) 2. Breakpoint = (Amount of capital where source cost changes / Proportion of capital from source)

I have prepared a notebook for formulae and written all importent equations planning to revise that daily after finishing question bank

Use: 1. z statistic >>>> normally distributed population with known variance 2. z-alternative >>>> large sample, population variance unknown 3. t distribution >>>> large sample OR normally distributed population, population variance unknown 4. z(0.05) = 1.65 >>>> 90% confidence 5. z(0.025) = 1.96 >>>> 95% confidence 6. z(0.005) = 2.58 >>>> 99% confidence

1. industry P/E ratio = Dividend payout ratio / (k – g) 2. Tax expense = current tax rate × taxable income + deferred tax liability
1. Net operating income (NOI) = gross rental income × (1 − vacancy rate) − operating expenses 2. value of the office building = NOI / market cap rate
1. percentage change in prices = Duration effect + Convexity effect = [-duration * (change in yields)] plus [convexity * (change in yields)^2]

cpk123 Wrote: ------------------------------------------------------- > rather than blind memorization, I would suggest > understand the applicability of the formula to > particular situations, while you solve problems. > > While the above list for Economics is very > commendable, from my experience - the only two > formulae that were applicable in the Dec 2007 exam > corresponded to Price elasticity of demand, and to > calculating the FX conversion (which chapter is no > longer in the 2008 syllabus). Almost all else in > Economics was understanding relationships between > variables, without use of formulae, entirely > conceptual stuff. > > That is my 2c. > > CP I also took the December exam and agree with CP 100%. Blind memorization is not helpful. Just take as many practice exams as possible and “think through” the necessary steps (which is all a formula is…just the steps required to come up with an answer). Try not to memorize, understand the concept…then the formula will come much more easily.