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