5: Finance Flashcards
(37 cards)
Breakeven formula
Fixed costs/contribution per unit = BE (units)
Contribution per unit formula
Contribution per unit = selling price - variable costs per unit
Total contribution formula
Contribution per unit x units sold = T Contribution
Margin of safety formula
Actual output - BE output
Profit formula
Revenue - Total costs
Return on investment formula
Final profit - outlay / outlay X100
What’s the gross profit margin?
Income from sales minus the cost of goods sold aka Revenue - direct costs
Gross profit formula
Revenue - direct costs = Gross profit
Where do you get information for Gross profit Margin from?
The income statement
What’s an income statement?
A record of a business sales revenue over a trading period and all relevant costs
Gross profit Margin formula
GP/Rev x100
What is operating profit?
Financial surplus from businesses normal trading activities, before taxation.
Operating profit formula
Gross profit - Indirect costs (overheads) = Operating profit
Operating profit margin formula
OP/Rev x100 = OPM
What is profit for the year?
Profits that take into account a wider range of expenditures and incomes eg. tax,interest
Profit for the year formula
OP - taxation = PFTY
Profit for the year margin formula
PFTY/Rev x100w
what type of tax do companies pay?
Corporate tax
Define profitability
Measure of financial performance that compares a businesses profits to some other factors like revenue
what is a profit margin?
Ratio that expresses a businesses profit as a % of its revenue over a trading period
What is break-even?
The point where level of sales exactly equal to total costs
What is contribution?
Difference between revenue and fixed costs
What is margin of safety?
The amount by which a businesses current level of output exceeds break-even output
What’s working capital?
Money for day to day trading activities (made of creditors, debtors and inventories)
