Component 2 formulas Flashcards
Price elasticity of
demand
(%)
% change in quantity demanded / % change in price
Income elasticity of
demand
(%)
% change in quantity demanded/ % change in income
Percentage change (%)
New - Old/ Old X100
3-year moving average
(in the units of the data
given)
(year 1 + year 2 + year 3)/3 X100
Working capital
(£)
Current assets - current liabilities
Net assets
(£)
(current assets + fixed assets) - (current liabilities + long term liabilities)
Shareholders’ funds
(£)
Share capital + reserves + retained profit
Capital employed
(£)
Shareholders’ funds + long-term liabilities
Current ratio
( :1 )
Current assets/current liabilities
Acid test ratio
( :1 )
(current assets-stock)/current liabilities
Gearing ratio
(%)
Long term liabilities/capital employed
Return on capital
employed
(%)
Net profit/capital employed X100
Gross profit margin
(%)
Gross profit/revenue 100
Net profit margin
(%)
Net profit/revenue X100
Depreciation
(£)
(original cost – residual value) / Expected life of the asset in years
Net book value
(£)
Historic cost - depreciation
Budget variance
(£)
Budget - actual
Expected value
(£)
(probability x outcome) + (probability x outcome)
Net gain
(£)
Expected value – original cost
EST
(time units)
EST of prior node + activity duration
LFT
(time units)
LFT of later node – activity duration
ARR
Average rate of return/initial investment X100
Payback period
Calculate years, then to calculate the months;
Outstanding amount/Monthly net cash flow of next year
Discounted cash flow
initial investment - sum of discounted cash flows
