Finance Equations Flashcards
Memorise the equations
What is the Accounting Equation (Assets)?
Liabilities + Equity
What are the 4 Profitability Ratios?
Return on Capital Employed (ROCE)
Gross Profit Margin
Operating Profit Margin
Net Asset Turnover
What’s the formula for Return on Capital Employed (ROCE)?
Operating Profit / (Equity funds + Non-Current Liabilities)
Whats the formula for Gross Profit Margin?
(Gross Profit / Turnover) x 100
What’s the formula for Operating Profit Margin?
(Operating Profit / Turnover) x 100
What’s the formula for Net Asset Turnover?
Turnover / (Equity + Non-Current Liabilities)
How is ROCE related to Net Asset Turnover?
ROCE = Operating Profit Margin x Net Asset Turnover
What’s the formula for Inventory Days?
(Closing Inventory / Cost of sales) x 365 days
What’s the formula for Trade Receivable Days (Collection Period)?
(Closing Trade Receivables / Revenue) x 365 days
What’s the formula for Trade Payable Days (Payment Period)?
(Closing Trade Payables / Cost of Sales) x 365 days
What’s the formula for Current Ratio?
Current Assets / Current Liabilities
What’s the formula for Quick (Acid Test) Ratio?
(Current Assets - Inventory) / Current Liabilities
What’s the formula for Gearing?
Debt / Equity
What’s the formula for Interest Cover?
Operating Profit / Finance Cost
What’s the formula for Dividend Cover?
Profit for the Year / Dividend
