Formulas

Question 1

What is the formula for Net Cash Flow?

Answer 1

Total Cash Inflow - Total Cash Outflow

This formula calculates the difference between cash inflows and outflows over a specific period.

Question 2

How is the Closing Balance calculated?

Answer 2

Opening balance + Net Cash Flow

This represents the final amount of cash available at the end of a period.

Question 3

What formula represents Total Revenue?

Answer 3

Selling Price x Quantity Sold

This formula calculates the total income from sales before any costs are deducted.

Question 4

What is the formula for Total Costs?

Answer 4

Fixed costs + Total Variable costs

This includes all expenses incurred in the production of goods or services.

Question 5

How is Profit calculated?

Answer 5

Total revenue - Total costs

This indicates the financial gain after all expenses have been deducted.

Question 6

What is the formula for Total Contribution?

Answer 6

Sales Revenue - Total Variable Costs

This shows how much revenue is contributing to fixed costs and profit.

Question 7

How is Contribution per unit calculated?

Answer 7

Selling Price - Variable Cost (per unit)

This indicates the profitability of each unit sold.

Question 8

What is the formula for Break-even Output?

Answer 8

Total Fixed Costs / Unit Contribution

This determines the number of units that must be sold to cover all costs.

Question 9

What does Margin of Safety represent?

Answer 9

Actual Sales - Break-even level of output

This indicates how much sales can drop before the business reaches its break-even point.

Question 10

How is Gross Profit calculated?

Answer 10

Sales Revenue - Cost of Goods Sold

This reflects the profit a company makes after deducting the costs associated with making and selling its products.

Question 11

What is the formula for Profit/Loss for the year?

Answer 11

Gross Profit - expenses + other income

This shows the net income after all expenses and additional income sources.

Question 12

How is Net Book Value calculated?

Answer 12

Cost - Depreciation

This indicates the value of an asset after accounting for depreciation.

Question 13

What is the formula for Net Current Assets?

Answer 13

Current Assets - Current Liabilities

This indicates the liquidity position of a company.

Question 14

How are Net Assets calculated?

Answer 14

Non-current assets + Net current assets - Long term liabilities

This represents the total assets available to shareholders.

Question 15

What does Capital Employed refer to?

Answer 15

Opening Capital + Profit for the Year less drawings

This indicates the total amount of capital that is being used in a business.

Question 16

What is the formula for Gross Profit Margin?

Answer 16

Gross Profit/Revenue x 100

This shows the percentage of revenue that exceeds the cost of goods sold.

Question 17

How is Mark-up calculated?

Answer 17

Gross Profit/Cost of Sales x 100

This indicates how much more than the cost price a product is sold for.

Question 18

What is the formula for Profit Margin?

Answer 18

Profit/Revenue x 100

This indicates the percentage of revenue that turns into profit.

Question 19

How is Return on Capital Employed calculated?

Answer 19

Profit/Capital Employed x 100

This measures the profitability and efficiency of capital usage.

Question 20

What does Current Ratio measure?

Answer 20

Current Assets/Current Liabilities

This indicates a company’s ability to pay short-term obligations.

Question 21

What is the Liquid Capital Ratio formula?

Answer 21

Current Assets - Inventory/Current Liabilities

This measures liquidity without considering inventory.

Question 22

How are Trade Receivable Days calculated?

Answer 22

Trade Receivables/Credit Sales x 365

This indicates the average number of days a company takes to collect payment.

Question 23

What is the formula for Trade Payable Days?

Answer 23

Trade Payables/Credit Purchases x 365

This indicates the average number of days a company takes to pay its suppliers.

Question 24

How is Inventory Turnover calculated?

Answer 24

Average Inventory/Cost of Sales x 365

This measures how quickly inventory is sold and replaced over a period.

Question 25

What is the formula for calculating average inventory?

Answer 25

Average Inventory = (Opening Inventory + Closing Inventory) / 2

Question 26

Profit (using contribution)

Answer 26

Contribution per unit x margin of safety

Question 27

Revenue

Answer 27

Unit price x quantity sold

Question 28

Cost of goods sold

Answer 28

Opening inventory + purchases - closing inventory

Question 29

Balance sheet (what needs to balance?)

Answer 29

Net assets (total assets - total liabilities) = capital employed

Question 30

What is the formula for calculating Mark Up?

Answer 30

Mark Up = (Selling Price - Cost Price) / Cost Price

Question 31

True or False: Mark Up is expressed as a percentage of the cost price.

Answer 31

True

Question 32

Fill in the blank: The formula for Net Profit Margin is ________.

Answer 32

Net Profit Margin = (Net Profit / Revenue) x 100

Question 33

What does ROCE stand for?

Answer 33

Return on Capital Employed

Question 34

What is the formula for ROCE?

Answer 34

ROCE = (Net Profit / Capital Employed) x 100

Question 35

True or False: Current Ratio is a measure of a company's liquidity.

Answer 35

True

Question 36

What is the formula for Current Ratio?

Answer 36

Current Ratio = Current Assets / Current Liabilities

Question 37

Fill in the blank: Liquid Capital is calculated by subtracting ________ from current assets.

Answer 37

Current Liabilities

Question 38

What is the formula to calculate Liquid Capital?

Answer 38

Liquid Capital = Current Assets - Current Liabilities

Question 39

Multiple Choice: Which formula represents the Net Profit Margin? A) (Net Profit / Revenue) x 100 B) (Revenue - Expenses) / Revenue C) (Net Income / Total Assets)

Answer 39

A) (Net Profit / Revenue) x 100

Question 40

What is the importance of Mark Up in pricing strategy?

Answer 40

It determines how much profit is made on each sale.

Question 41

True or False: A higher Net Profit Margin indicates better profitability.

Answer 41

True

Question 42

What does a Current Ratio of less than 1 indicate?

Answer 42

It indicates potential liquidity problems.

Question 43

Fill in the blank: A high ROCE indicates that a company is ________ in generating profits.

Answer 43

efficient

Question 44

What is the relationship between Liquid Capital and Current Ratio?

Answer 44

Liquid Capital is a component used to assess Current Ratio.

Question 45

Multiple Choice: Which of the following is NOT a measure of profitability? A) Net Profit Margin B) ROCE C) Current Ratio

Answer 45

C) Current Ratio

Question 46

What does a low Current Ratio suggest about a company's financial health?

Answer 46

It may indicate that the company may struggle to meet its short-term obligations.

Question 47

True or False: Liquid Capital includes all current assets.

Answer 47

False

Question 48

What is the significance of calculating Mark Up?

Answer 48

It helps in setting prices to achieve desired profit levels.

Question 49

Fill in the blank: The formula for calculating ROCE can be expressed as ________.

Answer 49

ROCE = (Net Profit / Capital Employed) x 100

Question 50

What is a typical desirable Current Ratio for most businesses?

Answer 50

1.5 to 2

Question 51

Multiple Choice: Which formula would you use to assess a company's operational efficiency? A) Mark Up B) ROCE C) Current Ratio

Answer 51

B) ROCE

Question 52

Fill in the blank: The higher the Net Profit Margin, the ________ the profitability.

Answer 52

greater

Question 53

What does Liquid Capital specifically measure?

Answer 53

The amount of liquid assets available to cover short-term liabilities.

Question 54

True or False: Mark Up can be calculated as a percentage of the selling price.

Answer 54

False

Question 55

What is the main purpose of the Current Ratio?

Answer 55

To evaluate a company's ability to pay off its short-term liabilities with its short-term assets.

Question 56

What is the formula for calculating Net Income?

Answer 56

Net Income = Total Revenue - Total Expenses

Question 57

True or False: The formula for Gross Profit is Gross Profit = Sales - Cost of Goods Sold.

Answer 57

True

Question 58

Fill in the blank: The formula for calculating Return on Investment (ROI) is ROI = (____ - Cost of Investment) / Cost of Investment.

Answer 58

Gain from Investment

Question 59

What is the formula for calculating Current Ratio?

Answer 59

Current Ratio = Current Assets / Current Liabilities

Question 60

Which of the following is the formula for Debt to Equity Ratio? a) Total Liabilities / Total Assets b) Total Liabilities / Total Equity c) Total Equity / Total Liabilities

Answer 60

b) Total Liabilities / Total Equity

Question 61

What does the formula for Operating Margin measure?

Answer 61

Operating Margin = Operating Income / Revenue

Question 62

Fill in the blank: The formula for Earnings Before Interest and Taxes (EBIT) is EBIT = Revenue - ____.

Answer 62

Operating Expenses

Question 63

True or False: The formula for Quick Ratio is Quick Ratio = (Current Assets - Inventory) / Current Liabilities.

Answer 63

True

Question 64

What is the formula for calculating Break-even Point in units?

Answer 64

Break-even Point (units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

Question 65

What is the formula for calculating Contribution Margin?

Answer 65

Contribution Margin = Sales Revenue - Variable Costs

Question 66

What is the formula for Price Earnings Ratio (P/E Ratio)?

Answer 66

P/E Ratio = Market Value per Share / Earnings per Share

Question 67

Fill in the blank: The formula for Dividend Yield is Dividend Yield = Annual Dividends per Share / ____.

Answer 67

Market Price per Share

Question 68

What is the formula for calculating Total Assets?

Answer 68

Total Assets = Total Liabilities + Owner's Equity

Question 69

Which of the following is the formula for Operating Cash Flow? a) Net Income + Depreciation + Changes in Working Capital b) Net Income - Depreciation + Changes in Working Capital c) Net Income + Interest + Taxes

Answer 69

a) Net Income + Depreciation + Changes in Working Capital

Question 70

True or False: The formula for the Compound Annual Growth Rate (CAGR) is CAGR = (Ending Value / Beginning Value) ^ (1 / Number of Years) - 1.

Answer 70

True

Question 71

What is the formula for calculating Asset Turnover Ratio?

Answer 71

Asset Turnover Ratio = Net Sales / Average Total Assets

Question 72

Fill in the blank: The formula for Working Capital is Working Capital = Current Assets - ____.

Answer 72

Current Liabilities

Question 73

What is the formula for calculating Inventory Turnover Ratio?

Answer 73

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

Question 74

What does the formula for Free Cash Flow measure?

Answer 74

Free Cash Flow = Operating Cash Flow - Capital Expenditures

Question 75

True or False: The formula for Total Debt Ratio is Total Debt Ratio = Total Liabilities / Total Assets.

Answer 75

True

Question 76

What is the formula for calculating Market Capitalization?

Answer 76

Market Capitalization = Share Price x Total Number of Outstanding Shares

Question 77

Fill in the blank: The formula for Net Profit Margin is Net Profit Margin = Net Income / ____.

Answer 77

Total Revenue

Question 78

What is the formula for calculating the Effective Annual Rate (EAR)?

Answer 78

EAR = (1 + i/n)^(nt) - 1, where i is the nominal rate, n is the number of compounding periods, and t is the number of years.

Question 79

Which of the following is the formula for Cash Flow Margin? a) Cash Flow from Operations / Total Revenue b) Net Income / Total Assets c) Operating Income / Total Revenue

Answer 79

a) Cash Flow from Operations / Total Revenue