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Economics > Accounting > Flashcards

Accounting Flashcards

(54 cards)

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1
Q

Return on Capital Employed (formula)

A

ROCE = ( Operating profit / (Equity + Non-current liabilities) ) x 100%

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2
Q

Gross Profit Margin formula

A

GPM = ( Gross profit / Sales ) x 100%

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3
Q

Operating Profit Margin formula

A

OPM = ( Operating Profit / Sales ) x 100%

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4
Q

Net Profit Margin formula

A

NPM = ( Profit for the year / Sales ) x 100%

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5
Q

Average inventories turnover period formula

A

( Average inventories held / Cost of Sales ) x 365 days

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6
Q

Average settlement period for trade receivables formula

A

( Average trade receivables / Credit Sales ) x 365 days

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7
Q

Average settlement period for trade payables formula

A

( Average trade payables / Credit Purchases ) x 365 days

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8
Q

Sales revenue to capital employed formula

A

Sales / (Equity + Non-current liabilities)

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9
Q

Sales revenue per employee

A

Sales / Number of employees

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10
Q

OPM x SRCE = ?

A

( Operating profit / Sales ) x ( Sales / (Equity + Non-current liabilities) ) = ROCE

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11
Q

Current ratio formula

A

Current assets / Current liabilities

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12
Q

Quick ratio (Aka “Acid-Test Ratio”)

A

(Current assets - Inventories) / Current liabilities

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13
Q

Gearing Ratio formula

A

Non-current liabilities / (Equity + Non-current liabilities) x 100%

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14
Q

Interest Cover ratio

A

Operating profit / Interest expense

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15
Q

Dividend payout ratio

A

Dividends announced for the year / (Profit for the year - Preference dividends) x 100%

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16
Q

Dividend Cover Ratio

A

1 / Dividend payout ratio

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17
Q

Dividend yield formula

A

( Dividend per share / Market price per share ) x 100%

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18
Q

Earnings per share (EPS) formula

A

(Profit for the year - Preference dividends) / Number of ordinary shares in issue

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19
Q

Price/Earnings (P/E) ratio

A

Market price per share / Earnings per share

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20
Q

Breakeven point formula

A

b = fixed cost / (sales revenue - variable cost per unit)

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21
Q

Contribution formula

A

Contribution = Sales revenue - variable cost

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22
Q

Margin of safety

Study These Flashcards
A

target output - breakeven output

23
Q

Accounting rate of return (ARR) formula

Study These Flashcards
A

( Average annual operating profit / Average investment ) x 100%

24
Q

Average investment formula

Study These Flashcards
A

(Initial investment + Scrap value) / 2

25
Cost of Sales
Opening inventories + purchases - closing inventories
26
Cost of sales (alternative method)
Quantity sold x price bought at
27
Annual depreciation expense (straight-line method)
(Cost - Estimated residual value) / Estimated useful life
28
Annual depreciation expense (reducing-balance method)
Carrying amount x depreciation rate
29
Gain (or loss) on disposal
Sale proceeds - Carrying amount (NBV) (Worth after depreciation)
30
Trade receivables formula
Beginning trade receivables + Credit sales - Receipts from credit customers - bad debts written off = End trade receivables
31
Retained earnings formula
Beginning retained earnings + Profit for the year - Dividends declared = End retained earnings
32
What can revenue be broken down into on the income statement
Credit sales + Cash sales
33
Trade payables formula
Opening payables + Purchases - Payment to suppliers = Closing payables
34
Dividends payable formula
Opening dividends payable + Dividends approved for the year 20X1 - Dividends paid during the year = Dividends approved and payable at the end of 20X1
35
NPV compounding formula
Pn = P0(1 + r)^n
36
NPV discounting formula
P0 = Pn / (1 + r)^n
37
If a question is about making a decision, what should I be calculating
Whether overall contribution is positive
38
Internal rate of return
r(a) + (NPVa (rb - ra) / (NPVa - NPVb))
39
Annuity formula
AF(n,r) = (1 - (1 + r) ^ -n) / r
40
What does the gearing ratio tell us
How much of a company's operations are funded by debt compared to equity. A high gearing ratio suggests a company is heavily reliant on debt.
41
What is a preference dividend
a fixed dividend payment that is given to holders of preference shares before any dividends are paid to ordinary shareholders.
42
What is an accrued expense
expenses that are outstanding at the end of the reporting period - recorded as current liabilities on the SoFP
43
What is a prepaid expense
expenses that have been paid in advance at the end of the reporting period - recorded as current assets on the SoFP
44
What goes on debit on a trial balance when it increases and credit when it decreases?
Assets and expenses
45
What goes on credit on a trial balance when it increases and debit when it decreases
Equity, liabilities and revenue
46
Net cash flows from operating activities
Operating profit + Loss on disposal + Depreciation expense - Increase in inventories - Increase in trade receivables + Increase in trade payables + Amortisation + Increase in accruals = Cash from operating activities - Dividends paid - Interest paid - Tax paid = Net cash flow from operating activities
47
what does cash flows from investing activities relate to
cash flows from acquisitions/disposals of non-current assets
48
cash flows from financing activities
Increase in loans + Issuance of shares - Dividends paid
49
What is on the statement of changes in equity
Ordinary shares (SoFP), Retained Earnings (SoFP) Profit for the period (IS), Dividends declared Total equity
50
Structure of an income statement
Revenue - Cost of Sales = Gross profit - Operating expenses = Operating profit - Interest payable = Profit before taxation - Taxation = Profit for the period
51
What is cost of goods sold
The direct costs associated with producing the goods or services that a company sells
52
Why would the full long term bank loan not be recorded as non-current liabilities
A repayment due within the next year is a current liability
53
Is a prepaid/accrued expense recorded on the SoFP
Yes: Prepaid expense - Current asset Accrued expense - Current liability
54
What are the four enhancing qualitative characteristics of accounting information
Comparability Verifiability Timeliness Understandability

Economics (2 decks)

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