Unit 3 Formulas So Far

Question 1

Straight line depreciation

Answer 1

Original cost of the fixed asset / useful life of the asset

Question 2

Working capital

Answer 2

Current assets - current liabilities

Question 3

Capital employed ( For Companies with Shareholders )

Answer 3

Shareholder funds + long-term liabilities

Question 4

Shareholder funds

Answer 4

Share capital + reserves

Question 5

Return on capital employed

Answer 5

(Operating profit / capital employed) x100

Question 6

Current ratio

Answer 6

Current assets / current liabilities

Question 7

Acid test ratio

Answer 7

Current assets (excluding stock) / current liabilities

Question 8

Gearing ratio

Answer 8

(Non-current liabilities / capital employed) x100

Question 9

Price elasticity of demand (PED)

Answer 9

Percentage change in quantity demanded / percentage change in price

Question 10

If the PED is 0 or less

Answer 10

Demand is perfectly inelastic. The demand for the product does not change at all when price changes. The demand curve will be vertical.

Question 11

If PED is between 0 and 1

Answer 11

Demand is inelastic

Question 12

If PED = 1

Answer 12

Demand is unit elastic. The percentage rise in price leads the exact same percentage fall in demand

Question 13

If PED > 1

Answer 13

Demand is elastic.

Question 14

Income elasticity of demand (YED)

Answer 14

percentage change in quantity demanded / percentage change in income

Question 15

Normal good (YED)

Answer 15

0-1 Demand is rising less than proportionately to a change in income

Question 16

Luxury goods (YED)

Answer 16

+1 Demand rises more than proportionately to a change in demand

Question 17

Inferior goods

Answer 17

0 - -1 Demand falls as income rises