Business finance

Question 1

What is the equation for ‘Break-even’? (units)

Answer 1

Fixed costs / contribution

Question 2

What is the equation for the ‘Mark-up’?

Answer 2

Gross profit / cost of goods sold X100

Question 3

What is the equation for ‘Total Contribution’?

Answer 3

Selling price per unit - variable costs per unit

Question 4

What is the equation for the ‘Reducing balance depreciation’?

Answer 4

Net book value X percentage rate

Question 5

What is the equation for ‘Net book value’?

Answer 5

Costs - depreciation

Question 6

What is the equation for ‘Total Revenue’?

Answer 6

Selling price X quantity sold

Question 7

What is the equation for the ‘Sales revenue’?

Answer 7

Selling price X quantity sold

Question 8

What is the equation for ‘Trade receivable days’?

Answer 8

(Trade receivables / credit sales) X365

Question 9

What is the equation for the ‘Net current assets’?

Answer 9

Current assets - current liabilities

Question 10

What is the equation for the ‘Gross profit’?

Answer 10

Sales revenue - direct costs

Question 11

What is the equation for ‘Profit’?

Answer 11

Total revenue - total costs

Question 12

What is the equation for the ‘Gross profit margin’?

Answer 12

Gross profit / sales revenue X100

Question 13

What is the equation for the ‘Profit margin’?

Answer 13

Profit / revenue X100

Question 14

What is the equation for ‘Trade payable days’?

Answer 14

(Trade payables / credit purchases) X365

Question 15

What is the equation for ‘Total costs’?

Answer 15

Fixed costs + variable costs

Question 16

What is the equation for ‘Net cash flow’?

Answer 16

Total income - total expenditure

Question 17

What is the equation for ‘Liquid capital ratio’?

Answer 17

(Current assets - inventory) / current liability

Question 18

What is the equation for ‘Current ratio’?

Answer 18

Current assets / current liabilities

Question 19

What is the equation for ‘Inventory turnover’?

Answer 19

(Average inventory / cost of sales) X365

Question 20

What is the equation for ‘Profit’? (using contribution)

Answer 20

Contribution per unit X margin of safety

Question 21

What is the equation for the ‘Margin of safety’? (value)

Answer 21

Margin of safety (units) X selling price

Question 22

What is the equation for the profit/loss for the year?

Answer 22

Gross profit - (expenses + other income)

Question 23

What is the equation for ‘Margin of safety’? (units)

Answer 23

Actual sales - break-even point

Question 24

What is the equation for the ‘Net assets’?

Answer 24

Non current assets + net current assets - non current liabilities

Question 25

What is the equation for 'Closing balance'?

Answer 25

Opening balance + net cash flow

Question 26

What is the equation for the 'Return on capital employed'?

Answer 26

Profit / capital employed X100

Question 27

What is the equation for the 'Straight line depreciation'?

Answer 27

(Original price - scrap value) / estimated useful life of asset

Question 28

What is the equation for the 'Cost of goods sold'?

Answer 28

(Opening inventory + purchases) - closing inventory

Question 29

What is the equation for 'Contribution per unit'?

Answer 29

Selling price - variable cost

Question 30

What is the equation for 'Capital employed'?

Answer 30

Opening capital + profit for the year - what you've drawn out

Question 31

What is the equation for 'Break-even'? (sales value)

Answer 31

Break-even X selling point

Question 32

What is an advantage and disadvantage for cash?

Answer 32

Ad: No security breaches, no overspending, easy to track expenses Dis: You can easily lose it, doesn't gain interest, doesn't come with a zero fraud liability guarantee

Question 33

What is an advantage and disadvantage for a credit card?

Answer 33

Ad: Can build credit, protection against credit card fraud Dis: High interest rates if not paid in full, fees for late payments, annual fees

Question 34

What are 2 inflows which could be recorded in a cash flow forecast?

Answer 34

Cash sales, credit sales, rent received, bank interest, loan

Question 35

State 2 examples of intangible capital expenditure

Answer 35

Patent, copyright, goodwill, logos