Formulas Flashcards
ROCE
Return on Capital Employed = net profit margin x asset turnover
Or
ROCE = Operating profit / Capital employed x 100(%)
Operating profit: profit before finance costs & tax
Capital employed: Equity & long term debt
Equity = assets - liabilities
Cost as a % of revenue
Cost / Revenue x 100(%)
Asset turnover
Revenue / Capital employed
Capital employed: equity + long term loans
Gross Profit Margin
Gross profit / Revenue x 100(%)
Gross profit = Sales - Cost of Sales
RONA
Return on Net Assets = Operating profit / Net assets x 100(%)
Net Operating Profit Margin
Operating profit / Revenue x 100 (%)
Working Capital
Current assets - Current liabilities
Target Profit
Total fixed costs + required profit / contribution per unit
C/S Ratio
*needs editing
c/s ratio = contribution per unit / sales price per unit
c/s: contribution to sales
Contribution per unit
Selling price per unit - variable cost per unit
Budgeted Profit
Total contribution - fixed costs
Breakeven Point (units)
Total fixed costs / contribution per unit
The volume of sales at which neither a profit nor a loss is made.
Breakeven Point (sales)
Total fixed costs / c/s ratio
Is the £ amount of sales to breakeven
C/S ratio = contribution per unit / sales price per unit
Current Ratio
Current assets / Current liabilities
Liquidity ratio
Acid Test Ratio (Quick Ratio)
Current assets less inventories / Current liabilities
Liquidity ratio
Inventory Holding Period
Inventory Days
Inventories / Cost of sales x 365 days
Shows the number of days on average that a business holds inventory
Liquidity ratio
Trade Receivable Days
Trade receivables / Revenue x 365 days
A high value shows the company is selling its product to customers on credit and taking longer to collect money.
Liquidity ratio
Trade Payable Days
Trade payables / Cost of sales (or purchases) x 365 days
Shows how long it takes a company to pay its invoices from trade creditors
Purchases aka bought in materials & services
Cost of sales: opening inventory + purchases - closing inventory
Liquidity ratio
Working Capital Cycle
Inventory Days + trade receivable days - trade payable days
Measures the time between payment for goods received (inventory) and collection of cash from customers.
Liquidity ratio
Value Added
Value of revenue - cost of bought in services & materials
Profit for the Period Margin
Operating profit / sales revenue x 100(%)
Shows % of business’s sales revenue has been turned into profit after all costs and expenses for the period have been deducted but before interest and taxation.
Interest Cover
Operating profit / interest payable
Is a measure of a business’s ability to pay interest on its borrowings out of the profit that it has made.
Sales volume to achieve a particular profit
Total fixed costs + required profit / contribution per unit
Margin of Safety (units)
Budgeted sales units - Breakeven sales units
Is used in breakeven analysis to indicate the amount of sales that are above the breakeven point.
Margin of Safety (%)
Budgeted sales units - Breakeven sales units / Budgeted sales units x 100(%)
Margin of Safety (sales revenue)
Margin of Safety in units x sales price per unit
Regression Line Equation
y = a + bx
a is the fixed element
b is the variable element
Index
Index = current period figure / base period figure x 100
*base period figure: the price at that time will have an index of 100
Current price adjusted figure (index)
= actual revenue x RPI in current year / RPI in year of sales
RPI = Retail Price Index
Gearing
Total debt / total equity x 100
Or
Total debt / total debt + equity x 100
*Total Debt consists of all interest baring debt & does NOT include current liabilities
New amount using index
% of increase between amounts
Historical price x index of time converting to / index of time converting from
% of increase:
New price - historical price / historical price x 100
