Calculations

Question 1

Accounting equation

Answer 1

Liabilities + Equity = Assets

Question 1

Gross profit

Answer 1

Sales revenue - cost of sales

Question 2

operating profit

Answer 2

Gross profit - operating expenses

Question 3

Weighted Average Cost of Capital

Answer 3

(E / V x Re) +(D / V x Rd x (1-Tc))

(Market value of the firm’s equity / Total market value + Cost of equity) + (market value of the firm’s debt / Total market value x Cost of debt x (1-Corporate tax rate))

Question 4

Indirect Method

Answer 4

1. Cancel non-cash transactions (e.g., depreciation)
2. Changes in Working capital (current assets - current liabilities)
3. Other cash paid during the year (e.g, interest, tax)

Question 5

Break even point

Answer 5

fixed cost / sales revenue per unit - variable cost per unit

Question 6

Contribution per unit

Answer 6

selling price per unit - variable cost per unit

Question 7

cost of sales

Answer 7

opening inventories + purchases - closing inventories

Question 8

Current ratio

Answer 8

current assets / current liabilities

Question 9

Acid test ratio

Answer 9

current assets - inventory / current liabilities

Question 10

Return of capital employed

Answer 10

operating profit / equity + non current liabilities x100

Question 11

trade receivable settlement period

Answer 11

trade receivable / sales revenue x 365

Question 12

inventory holding period

Answer 12

inventory / cost of sales x 365

Question 13

trade payable settlement period

Answer 13

trade payables / cost of sales x 365

Question 14

gearing

Answer 14

non current liabilities / equity + non current liabilities x 100

Question 15

interest cover

Answer 15

operating profit / interest expense