E Formulas Flashcards
(22 cards)
Return on equity?
(Profit for year (after tax) / (Share capital + Reserves)) * 100
Return on capital employed?
(Operating profit / Capital Employed) * 100
Capital employed
Total assets less current liabilities = total equity plus long-term debt
Gross profit margin?
(Gross profit / Revenue) * 100
Operating profit margin?
(Operating profit / Revenue) * 100
Asset turnover ratio?
(Revenue / Capital Employed)
ROCE combined formula?
Operating profit margin * Asset turnover
Current ratio?
Current assets / current liabilities
Inventory holding period?
(Average inventory / Cost of sales) * 365
Receivables collection period (days)?
(Average receivables / Credit sales) * 365
Payables payment period (days)?
(Average payables / Credit purchases) * 365
Quick ratio?
(Current assets - Inventory) / Current liabilities
Gearing as a percentage
(Debt / total equity) * 100
Gearing
(Debt / Debt+Total Equity) * 100
Interest cover
(Profit before financing and income taxes) / Interest
ROI for manager?
(Controllable profit / Capital employed) * 100
ROI for division?
(Traceabke profit / capital employed) * 100
Imputed interest?
Capital employed × Interest rate
What is minimum transfer price equal to (for selling division)?
Marginal (variable cost) + Opportunity cost
Minimum (per selling division)
Transfer price ≥ Marginal cost of selling division
Maximum (per buying division)
Transfer price ≤ lower of (external market price & net marginal revenue of buying division)
Marginal cost (transfer pricing)
Variable cost + Any incremental fixed costs, e.g. stepped costs
