Accounting & Finance Key Notes Flashcards
Key things to remember
Gross Profit Margin
Gross Profit / Revenue x100
A measure of profitability compared to revenue
Operating Profit Margin
Operating Profit / Revenue x100
A measure of profitability compared to revenue
Revenue per Employee
Revenue / Total number of Employees
A measure of revenue compared to employees
Sales Revenue to Capital
Revenue / Total Capital Employed
(NCL + Owners Equity)
A measure of how well a manager has used the resources available
Return on Capital Employed (ROCE)
Operating Profit / Total Capital Employed x100
(NCL + Owners Equity)
A ratio useful for shareholders
Return on Shareholders Funds (ROSF)
Profit for the Year / Owners Equity ×100
A ratio useful for shareholders
Gearing Ratio
NCL / NCL + Owners Equity
A measure of the relationship between debt and equity
Interest Cover
Operating Profit / Interest Payable
A measure of how easily a firm can pay it’s interest
Trade Receivables Collection Period
Trade Receivables/ Sales Revenue x365
Trade Payables Collection Period
Trade Payables / Cost of Sales ×365
Inventory Turnover Period
Inventory / Cost of Sales ×365
Operating Cycle
Inventory Holding Period + Trade Receivables - Trade Payables
Current Liquidity Ratio
Current Assets / Current Liabilities
A measure of the firms ability to pay it’s debts
Acid Test
Current Assets - Inventory / Current Liabilities
A measure of the firms ability to pay it’s debts excluding inventory
Earnings per Share (EPS)
Total Profit / Nominal Share Capital × Share Value
A measure of profitability, can be basic or diluted
Dividend Cover Ratio
EPS / Dividend per Share
What proportion of attributable earnings are paid to shareholders, same as dividend Payout ratio
Dividend Payout Ratio
Dividend per Share / EPS x100
What proportion of attributable earnings are paid to shareholders, same as dividend Cover Ratio
Dividend Yield Ratio
Grossed up Dividends per Share / Market Value per Share
(Dividends /0.9)
Relates cash return from a share to its current market value
Price Earnings Ratio (P/E)
Market Value per Share / EPS
Compares market value with earnings
The higher the figure the greater the markets confidence in the firm
Overhead per Unit
Cost Center Overhead / Output
Break Even Point
Fixed Costs / Contribution per Unit
Margin of Safety
Expected Sales - Break Even Sales / Expected Sales
