Finance Formulas Flashcards
Payback
Once the cumulative revenue is below revenue,
(Cumulative that year / next revenue) x 12
ARR
((Total net / number of years) /initial cost) x 100
NPV
{ (revenue x rate) - initial cost
Working capital
Current assets - current liabilities
It provides an indication of their ability to pay their debts
Current ratio
Current assets / current liabilities
liquidity
Acid test ratio
(Current assets - stock) / current liabilities
liquidity
Creditor days
Trade payables / cost of sales
x 365
The average time for a business to settle its debts with trade suppliers
(liquidity)
Debtor days
Trade debtors / revenue x365
The estimated time for debtors to pay the business
(liquidity)
Gross profit margin
Gross profit / revenue x100
Shows how much out of every £1 is gross profit
(profitability)
Net profit margin
Net profit / revenue x 100
Shows how much of every £1 is net profit
(profitability)
Return on capital employed
Operating profit /capital employed
X100
It is the percentage return on money invested
(profitability)
Return on equity
Net profit / equity x100
profitability
Non current asset turnover
Revenue / non current assets
How much every £1 invested is making
(efficiency/activity
Stock turnover
Cost of sales / stock
How many times you are getting through stock
(efficiency/activity)
Gearing ratio
(Fixed cost capital / long term capital) x 100
The proportion of assets invested that are financed by long term borrowing
(efficiency/activity)
