A Level Finance Formualas Flashcards
Break even
Fixed cost / contribution
Margin of safety
Current output - breakeven output
Net cash flow
Cash inflow – cash outflow
CFF closing balance
Opening balance + net cash flow
Cost of sales (cost of goods sold)
Opening Stock + Purchases – Closing Sales
Gross profit
Sales Revenue – Cost of Sales
Gross profit %
(Gross Profit / Sales revenue) x 100
Net profit (income statement)
Gross Profit – Expenses
Net profit %
(Net profit / sales revenue) x 100
Capacity utilisation
(Actual output / maximum possible output) x 100
Labour productivity
output per time period - Number of employees at work
Labour productivity
output per time period - Number of employees at work
Labour turnover
(Staff leavers per year / average number of staff) x 100
Added value
selling price of product – the cost of production
Working Capital
Current asset – current liabilities
Net Assets
Fixed assets + current assets – current liabilities
BS* Net Profit
Capital Employed – Opening Capital + Drawing
Capital Employed ( for Sole traders and Partnerships )
Total assets + net profit – drawings
Depreciation
(Original Cost - Residual Value) /Expected life (years)
Current Ratio
Current assets / current liabilities
Acid Test Ratio
(Current assets - stock) / current liabilities
Gearing Ratio
(Long term liabilities / capital employed) x100
Return on Capital Employed (ROCE)
(Net profit / capital employed) x100
Average Annual Profit
Total Profit / Number of years
Average Rate of Return
(Average annual profit / initial investment) x100
Payback Period with Constant Annual Net Cash Flow
Payback *annual net cash flow is constant
Payback
Initial outlay / net cash per time period
Net cash flow rule
Annual net cash flow fluctuates
Payback
Investment outstanding / Monthly cash in year of payback
Calculating % increase change
(New-old) / original x100
Calculating % decrease change
(Old-new) / original x100
Price of elasticity of demand (PED)
% change in quantity demanded / % change in price
Income elasticity of demand (YED)
% change in quantity demanded / % change in income
BS* Capital employed (most used)
LTL + shareholder funds
Profit margins
(Profit / revenue) x100
Break even (with margin of saftey)
Current output - margin of saftey
How to calculate payback period
Calculate the cumulative cash flow over the years
Payback months
Income needed in period / contribution per month
Social Benefit
Private benefit + public benefits
(If social benefits are greater than social costs, them go ahead with the proposal)
Social cost
Private costs + public costs
(If the social costs are greater than social benefits, then do not go ahead with the proposal)
