Simple Formulas

Question 1

Quick ratio

Answer 1

Current assets - inventory-prepaid / current liabilities

A liquidity ratio

Question 2

Working capital

Answer 2

Current asset- current liabilities

Question 3

Current ratio

Answer 3

Current assets/current liabilities

A liquidity ratio

Question 4

Return on assets

Answer 4

Net income/total assets

Question 5

Growth rate

Answer 5

End - beg/ beg

Question 6

Operating margin

Answer 6

Operating income/revenue

Question 7

Average collection period

Answer 7

(365 x avg AR)/ credit sales

Question 8

Cash conversion cycle

Answer 8

Days of sales outstanding + days of inventory outstanding - days of payables outstanding

Question 9

Inventory turnover

Answer 9

COGS / avg inventory

Question 10

AR turnover

Answer 10

Nest credit sales / avg AR

Question 11

Economic value added

Answer 11

Measures profit

Net operating profit after taxes - ( WACC x invested capital)

Question 12

DCF

Answer 12

[Yr 1 CF / (1+r)^1] + [yr 2 CF / (1+r)^2]

Question 13

Break even formula

Answer 13

Fixed costs / contributions margin

Question 14

How to calculate number of units to achieve a number in sales?

Answer 14

Fixed cost +target profit / contributions margin per unit

Question 15

Hi low method

Answer 15

(Highest cost - lowest cost) / (most units - least units)

Question 16

Elastic/ I elastic formula

Answer 16

% in change of quantity demand/ % change of price

Question 17

What is systematic risk

Answer 17

Market risk

Question 18

Marginal propensity to spend

Answer 18

(High level of consumption- low level of consumption) / high level disposable income - low level of disposable income