Financial Statement Analysis (Only for 4E and 5N students) - Formula

Question 1

Write down the formula for:

Gross profit margin

Answer 1

[Gross profit/Net sales revenue] x 100%

Question 2

Write down the formula for:

Profit margin

Answer 2

[Profit for the year/Net sales revenue] x 100%

Question 3

Write down the formula for:

Markup on cost

Answer 3

[Gross profit/Cost of sales] x 100%

Question 4

Write down the formula for:

Expenses to net sales revenue

Answer 4

[Operating expenses/Net sales revenue] x 100%

Question 5

Write down the formula to calculate cost of sale

Answer 5

Cost of sales = Net sales revenue - Gross profit

Question 6

Write down the formula for:

Return on equity

Answer 6

[Profit for the year/Average equity] x 100%,

Average equity = (Beginning equity + Ending equity)/2

Question 7

Write down the formula for:

Working capital

Answer 7

Current assets - Current liabilities

Question 8

Write down the formula for:

Current ratio (working capital ratio)

Answer 8

Current assets / Current liabilities

Question 9

Write down the formula for:

Quick ratio (acid test ratio)

Answer 9

[Cash in hand + Cash at bank + Net receivables] / Current liabilities

OR

[Current assets - Inventory - Prepayments] / Current liabilities

Question 10

Write down the formula for:

Inventory turnover ratio

Answer 10

Cost of sales / Average inventory,

Average inventory = (Beginning inventory + Ending inventory)/2