Finance equations

Question 1

Liquidity: Current ratio equation

Answer 1

Current Assets / Current liabilities

Question 2

Liquidity: Acid Test Ratio

Answer 2

(current assets - stock) / current Liabilites

Question 3

Profitability: Gross Profit Margin

Answer 3

Gross Profit / Sales revenue X 100

Question 4

Profitability: Net Profit Margin

Answer 4

Net Profit / Sales Revenue X 100

Question 5

Profitability: ROCE (return on capital employed)

Answer 5

Operating profit / (total equity + non-current liabilities) X 100

Question 6

Profitability: Return on equity

Answer 6

Operating Profit / total equity X 100

Question 7

Gearing: Gearing

Answer 7

Non-Current Liabilities / (total equity + non-current liabilities)

Question 8

Gearing: interest cover

Answer 8

Operating profit / interest payable

Question 9

Financial Efficiency: Recivables (Debtor Days)

Answer 9

Trade Receivables (debtors) / sales revenue X 365

Question 10

Financial efficiency: Payable (Creditor days)

Answer 10

Trade Payables (creditors) / cost of sales X 365

Question 11

Financial Efficiency: Asset Turnover

Answer 11

Sales Revenue / Net assets (Assets - Liabilities)

Question 12

Financial Efficiency: Stock Turnover

Answer 12

Cost of sales / stock

Question 13

Shareholder: Dividend per share

Answer 13

Total dividends paid / Number of shares in issue

Question 14

Shareholder: dividend Yield

Answer 14

Dividend per share / share price

Question 15

Shareholder Ratios: Dividend cover

Answer 15

Profit after Tax / Dividends

Question 16

Shareholder ratios: Earnings per Share (EPS)

Answer 16

Profit after Tax / Number of shares issued

Question 17

Shareholder ratios: Price earnings Ratio

Answer 17

Share price / earnings per share

Question 18

Revenue

Answer 18

selling price per unit x number of units sold

Question 19

Variable costs

Answer 19

variable costs per unit x number of units sold

Question 20

total costs

Answer 20

Fixed costs + Variable costs

Question 21

Profit

Answer 21

Total revenue - Total costs

Question 22

Market Growth %

Answer 22

change in size of market (specified time) / original size of the market

Question 23

Added Value

Answer 23

Sales revenue - costs of brought in goods and services

Question 24

Labour Productivity

Answer 24

output (specified time) / number of employees

Question 25

Unit costs (average costs)

Answer 25

total costs / number of units of output

Question 26

Gross profit

Answer 26

Revenue - cost of sales

Question 27

Operating profit

Answer 27

gross profit - operating costs

Question 28

Variance

Answer 28

Budgeted figure - actual figure

Question 29

Contribution per unit

Answer 29

Selling price - Variable costs per unit

Question 30

Total contribution

Answer 30

Contribution per unit X units sold OR total revenue - total variable costs

Question 31

Break even output

Answer 31

Fixed costs / contribution per unit

Question 32

Margin of safety

Answer 32

Actual level of output - Break even level of output

Question 33

Labour turnover (%)

Answer 33

number of staff leaving / number of staff employed X 100

Question 34

What is found on a income statement

Answer 34

``` Revenue cost of sales gross profit expenses operating profit depreciation profit before interest and tax finance costs Profit before tax Tax Profit for the year Dividends retained profit ```

Question 35

What is found on statement of financial position

Answer 35

``` Non-current assets current assets total assets current liabilities non current liabilities capital & reserves attributable to equity holders total equity & liabilities ```

Question 36

What is on a cash flow forecast

Answer 36

``` Sales revenue interest on bank balances Subsidies Loans Share capital invested ```