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AF4/J10 > Business formulas > Flashcards

Business formulas Flashcards

1
Q

Operating margin (formula)

A

= Operating profit/sales x 100

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2
Q

Net Margin (formula)

A

= Net profit after tax/Sales x 100

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3
Q

ROE (Return on Equity)

A

ROE = Net profit after tax/Total Equity x 100

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4
Q

ROCE (Return on Capital Employed)
(formula)

A

ROCE = Profit before interest & tax/Capital Employed x 100

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5
Q

Financial Leverage (Gearing)
(formula)

A

Gearing = (Long term loans + Preference shares) / (Total Equity - Preference shares)

Sometimes calc’d as

Gearing = (Long term loans +short term loans + preference shares) / (Total assets - current liabilities)

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6
Q

Interest cover
(formula)

A

= Profit before interest & tax /Gross interest payable

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7
Q

Liquidity Ratio
(formula)

A

= (Current Assets - stock) / Current liabilities

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8
Q

Debtor turnover
(formula)

A

= Sales/Debtors

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9
Q

Debtor collection period in days
(formula)

A

= Debtors/Sales x 365

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10
Q

Stock turnover
(formula)

A

=Cost of sales/stock

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11
Q

Creditor turnover
(formula)

A

= Cost of sales/Trade creditors

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12
Q

Creditor turnover in days
(formula)

A

=Trade creditors/Cost of sales x 365

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13
Q

EPS (Earnings per Share)
(formula)

A

EPS = Net income/ Number of shares in issue

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14
Q

EBIT (Earnings before tax & interest)
(formula)

A

EBIT = Operating income (or profit) / number of shares in issure

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15
Q

EBITA
(formula)

A

EBITA = Net income + Interest + Taxes + Amortization

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16
Q

PE Ratio
(formula)

A

= Share price/EPS

17
Q

Dividend yield
(formula)

A

=Dividend per share/share price x 100

18
Q

Dividend cover
(formula)

A

= EPS / Dividend per share

19
Q

Price to book ratio
(formula)

A

= Share price / NAV per share

20
Q

Gordon’s growth model
(formula)

A

Share price = Dividend / (Return required - dividend growth)

21
Q

NAV (Net asset value)
(formula)

A

NAV = (total assets - liabilities - preference shares) / Number of shares in issue

AF4/J10 (3 decks)

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