financial ratios - component 2 formulas

Question 1

shareholders funds

Answer 1

share capital + reserves+retained profit

Question 2

total equity

Answer 2

share capital+ reserves+ retaained profit

Question 3

capital employed

Answer 3

shareholders funds + long term liabilities

Question 4

working capital

Answer 4

current assets - current liabilities

Question 5

ROCE defintion

Answer 5

how effectively the capital invested into a business is used to create profits

Question 6

ROCE formula

Answer 6

net profit before tax / shareholders funds(equity) + long term liabilities
X100

operating profit/ capital employed X100

Question 7

liquidity defintion

Answer 7

ability of a business to pay of its short term debts and the avalibility of working capital avaliable

Question 8

current ratio formula

Answer 8

current assets/ current liabilties :1

Question 9

acid ratio formula

Answer 9

current assets- stock / current liabilities :1

Question 10

gearing ratio

Answer 10

long term liabilties ( non-current liabilities)/ long term liabilities + shareholders fund ( capital employed

x100

Question 11

gross profit margin

Answer 11

gross profit / sales revenue X100

Question 12

operating profit margin

Answer 12

operating profit / sales rev X100

Question 13

net profit margin

Answer 13

net profit for year/ sales revenue X100

Question 14

net profit

Answer 14

TR -total expenses

Question 15

net book value

Answer 15

historic cost- depreciation

Question 16

index numbers for any time period

Answer 16

value in period/ value in base period x100

Question 17

price elasticity of demand

Answer 17

%change in quantity demanded/ % change in price x100

Question 18

income elasticity of demand

Answer 18

%change in quantity demanded/ %change in income

Question 19

percentage change

Answer 19

difference between figures / original figure x100

Question 20

3 point moving average

Answer 20

to calculate the three point moving average, take the three adjacent figures for each month and divide by three

Question 21

variance

Answer 21

budgeted figure-actual figure

Question 22

working capital

Answer 22

current assets- current liabilities

Question 23

capital employed

Answer 23

long term liabilities+ shareholders funds

Question 24

depreciation

Answer 24

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

Question 25

expected value

Answer 25

calculated by multiplying the estimated financial effect by its probability

Question 26

net gain

Answer 26

add the expected value of each outcome and deduct the costs associated with this decision

Question 27

EST

Answer 27

EST of the previous activity+ duration of previous activity(work from left to right)

Question 28

LFT

Answer 28

LFT at the end of following activity- duration of following activity(work from right to left)

Question 29

float time

Answer 29

LFT at end of task- duration of task- EST at start of task

Question 30

payback

Answer 30

year is where it changes from a negative cumulative cash flow to a positive

Question 31

Ravi

Answer 31

Loves you

Question 32

to calculate months

Answer 32

cumulative cash flow value (for year of last negative figures) /net cash flow (NCF)for the next year

Question 33

ARR(%)

Answer 33

divide the final cumulative cashflow value by the lifetime of the project to find out how much profit is generated on average each year

Question 34

ARR(%)

Answer 34

average annual profit/cost of investment x100

Question 35

DCF/NPV

Answer 35

1-multiply each years net cash flow by the discount rate for the year 2-total the discounted net cash flows and then subtract the initial investment

Question 36

contribution per unit

Answer 36

selling price-variable costs per unit

Question 37

total contribution

Answer 37

contribution per unit units sold

Question 38

total contribution

Answer 38

total revenue- total variable costs