Revision Flashcards
How to find gross profit
Revenue - costs of sale
How to find operating profit
Gross profit - finance costs
What is high gearing
High debt / low equity
An example of an internal financial variable
Financing agreements
Dividend policies
Return on capital employed
Operating profit / Share capital + reserves + non current liabilities x 100
Operating profit margin
Operating profit / sales revenue x 100
Gross profit margin
Gross profit / sales revenue x 100
Current ratio
Current assets / Current liabilities
Acid test ratio
Current assets (excluding inventories) / current liabilities
Payable days
Trade payables / cost of sales x 365
Receivable days
Trade receivables / cost of sales x 365
Inventory turnover
Average inventories held / cost of sales x 365
Gearing ratio
Non-current liabilities / share capital + reserves + non-current liabilities x 100
Accounting rate of return (ARR) formula
Average annual operating profit / average investment x 100
How to find average investment
(Cost of investment + disposable value) / 2
How to find PP
-cumulative cash flow / next years net cash flow
How to find the PV
Cash flow x discount factor
How to find NPV
Add together all the PVs
And subtract the initial cash
How to calculate PV without the exact discount factor
Cash flow / (1.(discount rate) to the power of however many years
Higher NPV =
Better
What is IRR
The discount rate, which, when applied to the future cash flows of a project, will produce an NPV of precisely 0
How to find profitability index
(NPV + initial investment) / Initial investment
