Equations

Question 1

units sold

Answer 1

(Fixed cost + Profit) / (SR/U - VC/C)

Question 2

Dividend yield

Answer 2

Dividend yield = Dividend per share / Price per share x 100 (%)

Question 3

Sales income to net working capital

Answer 3

Current assets - Current liabilities

Question 4

Dividend cover

Answer 4

Dividend cover = Profit after interest & tax / Dividend paid

Question 5

Relationships between IS and BS (Extended)

Answer 5

Assets (at the end of the period) = Equity (amount at the start of the period) + (Sales Revenue - Expenses) (for the period) + Liabilities (at the end of the period)

Question 6

Zero-based budgeting

Answer 6

budgeting approach based on the fact that all costs must be justified, therefore new budgets for each period

Question 7

Gross profit margin

Answer 7

GPM = Gross profit / Sales x 100 (%)

Question 8

Volume of activity to reach target profit level

Answer 8

Total sales revenue = Fixed cost + Variable cost + Target profit

Question 9

Operating cycle

Answer 9

weeks before cash is received from goods sold - # weeks credit before cash is received from purchase of goods

Question 10

b - number of units of output

Answer 10

b = Fixed costs / (Sales revenue per unit / Variable cost per unit)

Question 11

Measuring profit

Answer 11

Profit (or loss) for the period = Total revenue for the period - Total expenses incurred in generating that revenue

Question 12

Dividend per share

Answer 12

EPS * Dividend payout ratio

Question 13

BEP (extented)

Answer 13

Total sales revenue = Fixed costs + Variable costs

Question 14

Incramental budget

Answer 14

Budget based on previous periods, new budget based on previous budgets numbers

Question 15

Cost of goods sold - COGS

Answer 15

COGS = (Opening inventory + purchases) - closing inventory

Is only used if there is an opening and closing inventory in the balance sheet and you’re calculating the average inventories turnover period.

Question 16

Contribution

Answer 16

Contribution = selling price - variable cost

Question 17

ROCE - return on capital employed

Answer 17

Capital employed = Equity + non-current libabilities

Capital employed = Total assets - Current liabilities)

Operating profit / Capital employed

Question 18

Fixed costs (elements)

Answer 18

Total cost @ highest output - (Units @ highest output * variable cost/unit)

Question 19

Cash receivables

Answer 19

Opening balance + Credit sales - Closing balance

Question 20

Depreciation

Answer 20

(Cost of product - Estimated residual value at the end) / Estimated usef

Question 21

IRR

Answer 21

Latest DR - (Latest value of NPV / NPV per 1%)

Question 22

Acid test ratio

Answer 22

Acis test = (Current assets - Invetories) / Current liabilities

Question 23

Overhead absorption rate - OAR

Answer 23

Overheads / Direct labour hours

Question 24

Current ratio

Answer 24

Current ratio = Current assets / Current liabilities

Question 25

Accounting equation

Answer 25

Assets = Equity + Liabilites

Question 26

Gearing

Answer 26

Gearing = Non-current liabilities / Equity

Question 27

Target quantity

Answer 27

(Fixed costs + target profit) / (selling price - variable cost per unit)

Question 28

Payback period - PP

Answer 28

Initial investment / annual cash inflows

Question 29

Relationships between IS and BS

Answer 29

Assets (at the end of the period) = Equity (amount at the start of the period) + Profit (or - Loss) for the period + Liabilities (at the end of the period)

Question 30

Operating profit margin

Answer 30

OPM = Operating profit / Sales x 100 (%)

Question 31

BEP

Answer 31

Total sales revenue = Total costs

Question 32

Contribution margin ratio

Answer 32

Contribution margin ratio = Contribution / Sales revenue x100

Question 33

Working capital

Answer 33

Current assets - Current liabilities

Question 34

Activity based costing - ABC

Answer 34

1.Establishing an overhead cost pool for each support activity. There will be just one cost pool for each separate cost driver. 2. Assigning the total cost associated with each support activity to the relevant cost pool. 3. Charging the units of output with the total cost within each pool using the relevant cost driver.

Question 35

Proportion of current assets financed from short term sources

Answer 35

CL / CA

Question 36

P/E Ratio - Price per earnings

Answer 36

Market price per share / Earnings per share

Question 37

Variance

Answer 37

Difference between the budgeted cost and actual cost for example (+/-)

Question 38

Average inventories turnover period

Answer 38

(Average inventories / Cost of sales ) x 365

Question 39

Depreciation and NPV

Answer 39

Cost - residual value / estimated lifetime

Question 40

Cash flow

Answer 40

Profit + Depreciation when it comes to NPV

Question 41

Interest cover

Answer 41

Interest cover = Operating profit / Interest expense

Question 42

Average settlement period for trade receivables

Answer 42

TRSp = Average trade receivables / Credit sales x365

Question 43

Margin of safety

Answer 43

Maximum output units - break even number of units

Question 44

ROSF - Return on shareholders funds

Answer 44

ROSF = Profit for the period / (Share capital + Reserves)

Question 45

Average settlement period for trade receivables

Answer 45

Average trade receivables / Credit sales revenue x365

Question 46

Discount rate

Answer 46

1/(1+%)^n

Question 47

Profit

Answer 47

Sales revenue - Expenses

Question 48

Variable cost

Answer 48

(Total cost @ highest output - total cost @ lowest output) / (Units @ highest - Units @ lowest)

Question 49

Cost of sales / Cost of goods sold

Answer 49

Cost of sales = Opening inventories + Purchases - Closing inventories

Question 50

Fixed cost (element)

Answer 50

Total cost @ highest output - (units @ highest output x VC/U)

Question 51

Average settlement period for trade payables

Answer 51

TPSp = Average trade payable / Credit purcahses x365

Question 52

Contribution margin per unit

Answer 52

(Selling price per unit - variable cost per unit) / SR

Question 53

Variable cost

Answer 53

Total cost @ highest - total cost @ lowest / total units @highest - total units @ lowest

Question 54

EPS - earnings per share

Answer 54

Profit after interest and taxes / Number of ordinary shares x 100

Question 55

The accounting question (Extended)

Answer 55

Assets (at the end of the period) = Equity (amount at the start of the period) + Profit (or - Loss) for the period + Liabilities (at the end of the period)

Question 56

Dividend payout ratio

Answer 56

Dividend / profit