Accounting A2 Flashcards
Material usage variance
(standard quantity – actual quantity) * standard price
Material Price variance
(standard price – actual price) * actual quantity
Labour rate variance
(Standard rate – actual rate) * actual hours
Labour efficiency variance
(standard hours – actual hours) * standard rate
Earnings per ordinary share
(net profit after tax – preference share dividend) / number of ordinary issues shares
expressed as pence per share ($0.00/share)
if EPS is increasing that means the firm is earning more profit from each issued share, financial performance is improving
price earning ratio
market price per share / earnings per share
expressed as multiple (xx times)
Helps investors see whether the shares are over or under priced, high PE means future growth is expected however shares could be expensive, lower PE means less growth expected however less time to break even on investment since shares are worth less.
dividend per share
total ordinary shares dividend paid / number of issued ordinary shares
expressed as pence per share ($0.00/share)
High DPS indicates a good ROI for investors, keeps them happy.
Gearing ratio
(fixed cost capital (debt) / total capital employed (debt + equity) ) *100%
expressed as percentage (xx%)
measures the relationship between the long-term borrowing of a company and the equity.
dividend yield
(dividend paid per share/ market price of share) * 100%
expressed as percentage (xx%)
higher dividend yield is better for investors as they get higher return on investment
dividend cover
(profit after tax – preference share dividend) / total ordinary dividend paid
expressed as a multiple (x times)
shows how many times the dividend paid could have been paid from the profits earned durning the year, 2 times is good.
Return on capital employed
net profit before interest/ (issued shares + reserves + non current liabilities) * 100%
expressed as a percentage
measures if a firm can use its long term sources of funds efficiently in producing a good return.
