FORMULAS Flashcards
Accounting Equation
A = L + E
Expanded Accounting Equation
Assets = Liabilities + Equity + (Income - Expenses)
Net Profit
All income - All expenses
Gross Profit
Income Generated from Selling Goods - Cost of Goods Sold
Carrying Value
Original Cost - Accumulated Depreciation
Net Assets
Total Assets - Total Liabilities
Total Equity
Total Assets - Total Liabilities
Net Assets
= Total Equity
EBIT
EBIT = Revenue – COGS – Operating Expenses
Return on Equity (ROE)
= EBIT / Total Equity
Weighted Average Cost of Capital (WACC)
= [Debt / (Debt + Equity)](Required Rate of Return % Debt) + [Equity/Debt + Equity](Required Rate of Return% Equity)
Comprehensive Income
= Profit + Other Comprehensive Income (OCI)
Contribution margin
total sales revenue - total variable costs
Contribution margin per unit
= Selling price per unit - variable cost per unit
Contribution margin ratio
= Contribution margin per unit/selling price per unit
*it the the portion of revenue that will go towards covering fixed costs
Break-even point of sales revenue
Level of revenue needed to be earned to meet fixed costs
= fixed costs / contribution margin ratio
Sales volume (units) to earn desired profit
The extra profit that the business needs to earn in order to satisfy shareholder returns
= (Fixed costs + desired profit)/(contribution margin per unit)
Sales mix ratio
= Volume of sales for each product / total volume
WACM and WACM per unit
WACM is calculated by multiplying the CMU for a product by the sales mix ratio and the WACM per unit is the addition of all these seperate WACM’s.