CHAPTER CHAPTER 2 Summary o Formulas Value of the firm =Value of debt Value of equity Shareholders equity= Assets - Liabilities Net income = Revenues Expenses Net revenue - Cos t of goods so ld = Gro ss m arg in Gross margin - Operating expenses= Operating income Operating income - Net interest expense= Income before taxes Income before taxes - Income taxes = Income after taxes (and before extraordinary items) Income before extraordinary items Extraordinary items = Net income Net income - Preferred dividends= Net income available to common Cas h from operations + Cash from in vest ment + Cash from financing =Change in cash Ending equity = Beginning equity Total (comprehensive) income - Net payout to shareholders Comprehensive income = Net income Other comprehensive income Intrinsic premium= Intrin s ic value of equity - Book value of equity Market premium= Market price of equity Book value of equity Value added for shareholder s = Ending value - Beginning value Dividend Stock return 1 = P 1 1 + d 1 Page 2 Page 36 Page 38 Page 39 Page 39 Page 39 Page 39 Page 39 Page 39 Page 40 Page 40 Page 4 Page 44 Page 44 Page 46 Page 46