Formulas

Question 1

The Accounting Equation

Answer 1

A=L+E

Question 2

Profit

Answer 2

Revenue - Expenses

Question 3

Annual Depreciation expense

Answer 3

(cost of asset - expected residual value)/Assets expected useful life

Question 4

Net realizable value (NRV)

Answer 4

accounts receivable - provision for doubtful debt

Question 5

Cost of sales (COS)

Answer 5

inventory at beginning +purchases - inventory at the end of period

Question 6

Gross Profit

Answer 6

revenue - all other expenses

Question 7

Purchases

Answer 7

payments - opening balance +closing balance

Question 8

What is the Gross profit margin formula and what ratio does it measure ?

Answer 8

= GP/ sales x100

- Profitability

Question 9

What is the Operating expense margin formula and what ratio does it measure ?

Answer 9

= operating expenses excluding interest / sales

- profitability

Question 10

What is the ROA formula and what ratio does it measure ?

Answer 10

= PBIT/Average total assets

- profitability

Question 11

What is the ROE formula and what ratio does it measure ?

Answer 11

= NPAIT/ average shareholders equity

- profitability

Question 12

What is the Asset turnover formula and what ratio does it measure ?

Answer 12

= sales/ average total assets

- efficiency

Question 13

What is the Asset turnover period formula and what ratio does it measure ?

Answer 13

= average total assets/ sales x 365

- efficiency

Question 14

What is the inventory turnover period formula and what ratio does it measure ?

Answer 14

= average inventory/ COS x 365

- efficiency

Question 15

What is the current ratio and what classification does it measure ?

Answer 15

= current assets/current liabilities

- liquidity

Question 16

What is the Quick acid ratio (Acid test) formula and what ratio does it measure ?

Answer 16

= current assets - (Inventories + prepayments) / current liabilities
- liquidity

Question 17

What is the Operating cash flows formula and what ratio does it measure ?

Answer 17

= operating cash flow/average current liabilities

- liquidity

Question 18

What is the Gearing ratio formula?

Answer 18

non-current liabilities/ total equity +non-current liabilities x 100

Question 19

what is the debt to asset ratio ?

Answer 19

total liabilities / total assets x 100

Question 20

what is the indirect cost rate formula ?

Answer 20

indirect cost to be allocated/ total cost driver usage

Question 21

what is the full cost formula ?

Answer 21

direct costs + allocated indirect costs

Question 22

Break-even in units?

Answer 22

fixed costs/ contribution margin $PU

Question 23

Break-even in sales dollars?

Answer 23

Fixed costs/ Contribution ratio

Question 24

Contribution Margin $PU ?

Answer 24

Selling price - variable costs $PU

Question 25

Contribution margin ratio

Answer 25

Contribution margin/ selling price

Question 26

Weighted average contribution margin?

Answer 26

sum of contribution margin for each product x sales mix

Question 27

Margin of safety sales revenue ?

Answer 27

budgeted sales - break-even sales

Question 28

Margin of safety units ?

Answer 28

budgeted units - break-even units

Question 29

Degree of operating leverage ?

Answer 29

Contribution margin/ profit

Question 30

Profit Before Tax?

Answer 30

= PAT/ (1- tax rate)

Question 31

sales units to reach target profit ?

Answer 31

(FC+PBT)/ CM

Question 32

Sales revenue to reach target profit ?

Answer 32

(FC+PBT)/ CM ratio

Question 33

Net profit margin ?

Answer 33

NPAIT / sales x 100

Question 34

Accounts receivable settlement period

Answer 34

Average Accs rec/ Sales x365

Question 35

Accounts Payable settlement period

Answer 35

Average Accs payable / sales x365