Equations

Question 1

Equity =

Answer 1

Assets-Liabilities

Question 2

Assets =

Answer 2

Liabilities + Equity

Question 3

Straight Line method of depreciation =

Answer 3

Cost - Residual Value/ Time

Question 4

Reducing balance method of depreciation =

Answer 4

(1 -(Residual value/cost)^(1/n)) x 100

Question 5

Profit/Loss for period =

Answer 5

Revenue - Expense

Question 6

Assets =

Answer 6

Ownership interest + Liabilities

Question 7

(Closing) Assets =

Answer 7

(Opening) Equity +/- (Period) Profit/Loss + (closing) Liabilities

Question 8

Cash Balance =

Answer 8

Cash inflows - Cash outflows

Question 9

Accounting Rate of Return (ARR) =

Answer 9

Average annual operating profit/Average investment x 100

Question 10

Payback Period (PP) =

Answer 10

Initial investment/Cashflows

Question 11

Present Value =

Answer 11

Cash flow x Discount rate

Question 12

Net Present Value

Answer 12

All Present Values added together

Question 13

Internal Rate of Return (IRR) =

Answer 13

Ra + NPVa/(NPVa - NPVb) x (Rb-Ra)

Ra = lower discount rate
Rb = higher discount rate where NPV is negative
NPVa = NPV where discount is Ra
NPVb = NPV where discount is Rb

Question 14

Profitability Index (PI) =

Answer 14

Present Value Cashflows/Present value of initial cost

Question 15

Total cost =

Answer 15

Fixed costs + Variable cost per unit x number of units of output

Question 16

Regression Equation y =

Answer 16

a + b(x)

Question 17

b =

Answer 17

[ nΣxy – ΣxΣy ] / [ nΣx^2 – (Σx)^2 ]

Question 18

a =

Answer 18

[(Σy)/n] – [b(Σx)/n]

Question 19

Correlation (r) =

Answer 19

[ nΣxy – ΣxΣy ] / {[ nΣx^2 – (Σx)^2 ] [ nΣy^2 – (Σy)^2 ]}^1/2​

Question 20

R^2 =

Answer 20

Coefficient of Determination (what percentage of y appears to be caused by changes in x)

Question 21

Break-even point =

Answer 21

Fixed cost/Contribution per unit

Question 22

Contribution per unit =

Answer 22

Selling price per unit - variable cost per unit

Question 23

Margin of safety =

Answer 23

Normal sales level - Break-even output level

Question 24

Profit volume ratio (contribution margin ratio) =

Answer 24

(Contribution per unit/ selling price per unit) x 100
or
(Total contribution/ Total sales revenue) x 100

Question 25

Number of units to achieve the target profit =

Answer 25

(Fixed cost + Target profit) / Contribution

Question 26

Full cost =

Answer 26

Prime cost + Production / Conversion cost

Question 27

Overhead absorption rate =

Answer 27

Total overheads / total direct labour hours

Question 28

Overhead absorption rate (OAR) =

Answer 28

Manufacturing overhead cost (£) / Absorption base (e.g. labour or machine hours)