calculations

Question 1

gearing

Answer 1

(non current liabilities ÷ capital employed) x 100

Question 2

Gross profit margin

Answer 2

(gross profit ÷ revenue) x 100

Question 3

inventory turnover

Answer 3

cost of goods sold ÷ average inventory held

Question 4

recievable days

Answer 4

(receivables ÷ revenue) x 365

Question 5

payable days

Answer 5

(payables ÷ cost of sales) x 365

Question 6

operating profit margin

Answer 6

(operating profit ÷ revenue) x 100

Question 7

operating profit

Answer 7

gross profit - operating costs

Question 8

current ratio

Answer 8

current assets ÷ current liabilities

Question 9

Return On Capital Employed (ROCE)

Answer 9

operating profit ÷ capital employed

Question 10

Return On Investment (ROI)

Answer 10

(profit from investment ÷ cost of investment) x 100

Question 11

total contribution

Answer 11

contribution per unit x units sold
or
total revenue - variable costs

Question 12

contribution per unit

Answer 12

selling price - variable cost per unit

Question 13

Average rate of return (ARR)

Answer 13

(average annual return ÷ initial cost of project) x 100

Question 14

market share

Answer 14

(sales of one business ÷ total sales in the market) x 100

Question 15

profit for the year

Answer 15

operating profit + profit from other activities - net finance costs - tax

Question 16

market capitalisation of a business

Answer 16

number of issued shares x current share price

Question 17

capacity utilisation

Answer 17

(output ÷ maximum possible output) x 100

Question 18

inventory turnover

Answer 18

cost of sales ÷ average inventories held

Question 19

net gain

Answer 19

expected value - initial cost of decision

Question 20

labour turnover

Answer 20

(number of staff leaving ÷ number of staff employed) x 100

Question 21

break even output

Answer 21

Fixed costs ÷ contribution per unit

Question 22

Income Elasticity of demand (YED)

Answer 22

% change in demand ÷ % change in income

Question 23

Price Elasticity of Demand (PED)

Answer 23

% change in quantitu demanded ÷ % change in price

Question 24

capital employed

Answer 24

total equity + non-current liabilities

Question 25

market growth

Answer 25

(change in size of market ÷ original size of market) x 100

Question 26

added value

Answer 26

sales revenue - costs of bought-in goods and services

Question 27

labour productivity

Answer 27

output ÷ number of employees

Question 28

varience

Answer 28

budgeted figure - actual figure

Question 29

retention rate

Answer 29

(employees at the end of the period ÷ empoyees at the beginning) x100

Question 30

cost of sales

Answer 30

opening stock + purchases - closing stock

Question 31

operating profit before tax

Answer 31

operating profit + interest received - interest paid

Question 32

operating profit after tax

Answer 32

operating profit before tax - tax

Question 33

payback

Answer 33

1. net cash flow for next year ÷ 12 = Average monthly return
2. amount left to be paid ÷ monthly return = payback

Question 34

ARR

Answer 34

step 1: make net cash flow and CCF table
step 2: calculate average anual profit (divide final CCF by years)
step 3: calculate ARR (divide average anual profit by initial investment figure
step 4: x100

Question 35

NPV

Answer 35

step 1: Create net cash flow and CCF table
step 2: add a column for discount factor and NPV
step 3: Add discount factor values
step 4: multiply each net cash in flow by the discount factor
step 5: add up all NPV column to calculate total ROI
step 6: if the figure is negative then reject investment

Question 36

sensitivity analysis

Answer 36

• calculate the distance between optimistic and pessimistic values
• the variable with the largest difference between the values is the one that has the most influence on overall outcome.

Question 37

gross profit

Answer 37

revenue - cost of sales