Formulas Flashcards
Absenteesm
Measures the percentage of workdays lost due to employee absence.
Absenteeism = (Number of days of employee absence / Total number of workdays) × 100
What is the Accounting Rate of Return (ARR) (%)?
Measures the return on investment based on accounting profits.
ARR = (Average annual profit / Average investment) × 100
What is the Acid Test Ratio?
A liquidity ratio that shows a company’s ability to meet short-term liabilities without relying on inventory.
Acid test ratio = Liquid assets / Current liabilities
What is Annual Depreciation?
Spreads the cost of an asset over its useful life.
Annual Depreciation = (Original cost of asset - Expected residual value) / Expected useful life of asset (years)
What is Average Inventory?
Calculates the average amount of inventory held over a period.
Average inventory = (Inventory at start of year + Inventory at end of year) / 2
What is Average Investment?
The average value of an investment over its useful life.
Average investment = (Initial capital cost + Residual capital value) / 2
What is Capital Employed (%)?
Measures the total capital used in a business.
Capital employed = Non-current liabilities + Shareholders’ equity
What is Cost of Sales?
The total cost of goods sold during a period.
Cost of sales = (Opening inventories + Purchases) - Closing inventories
What is the Current Ratio?
Measures a company’s ability to pay short-term obligations.
Current ratio = Current assets / Current liabilities
What is the Dividend Cover Ratio (×)?
Indicates how many times a company can pay its dividends with its net profit.
Dividend cover ratio = Profit for the year / Annual dividends
What is Dividend per Share?
Shows the dividend earned per share.
Dividend per share = Total annual dividends / Total number of issued shares
What is the Dividend Yield Ratio (%)?
Measures the return on investment from dividends.
Dividend yield ratio = (Dividend per share / Market share price) × 100
What is Earnings per Share (EPS)?
Measures the profit earned per share.
Earnings per share = Profit for the year / Number of shares issued
What is the Gearing Ratio (%)?
Shows the proportion of finance that comes from debt.
Gearing ratio = (Non-current liabilities / Capital employed) × 100
What is Gross Profit?
The profit a company makes after deducting the cost of goods sold.
Gross profit = Revenue - Cost of sales
What is the Gross Profit Margin (%)?
Shows how much of revenue remains as gross profit.
Gross profit margin = (Gross profit / Revenue) × 100
What is Income Elasticity of Demand (IED)?
Measures how demand changes with consumer income.
Income elasticity = % Change in demand for the product / % Change in consumer incomes
What is Market Share (%)?
Measures a company’s sales relative to the market.
Market share = (Sales of the business in time period / Total market sales in time period) × 100
What is the Operating Profit Margin Ratio (%)?
Shows profitability from operations before taxes and interest.
Operating profit margin = (Operating profit / Revenue) × 100
What is the Price/Earnings (P/E) Ratio?
Measures how much investors are willing to pay for earnings.
P/E ratio = Market share price / Earnings per share
What is Price Elasticity of Demand (PED)?
Measures how demand responds to price changes.
PED = % Change in quantity demanded / % Change in price
What is the Rate of Inventory Turnover?
Shows how often inventory is sold and replaced.
Rate of inventory turnover = Cost of sales / Average inventory
What is Return on Capital Employed (ROCE) (%)?
Measures profitability relative to capital used.
ROCE = (Operating profit / Capital employed) × 100
What is Total Revenue?
Total earnings from sales.
Total revenue = Selling price × Quantity sold
What is Trade Payables Turnover (Days)?
Measures the average time taken to pay suppliers.
Trade payables turnover = (Trade payables / Credit purchases) × 365
What is Trade Receivables Turnover (Days)?
Measures how quickly debts are collected.
Trade receivables turnover = (Trade receivables / Credit sales) × 365
What is Working Capital (Net Current Assets)?
Measures the difference between current assets and current liabilities.
Working capital = Current assets - Current liabilities
