Revision:Business Studies A Level Unit 4 Formulae

TSR Wiki > Study Help > Subjects and Revision > Revision Notes > Business Studies > Business Studies A Level Unit 4 Formulae

A. Ratio Analysis

1. Profitability Ratios

Net Profit:

Net Profit / Sales X 100 = ____%

Gross Profit:

Gross Profit / Sales X 100 = ___%

ROCE:

(Operating Profit / Capital Employed) X 100 = ____%

2. Liquidity Ratios

Current Ratio:

Current Assets / Current Liabilities = _:_ e.g. 2:3

Acid Test Ratio:

Current Assets – Stock / Current Liabilities = _:_ e.g. 1:2

B. Activity Ratios

1. Stock Turnover Ratio

Average Stock / Cost of Goods Sold (Or Sales) X 365 = ____ Days e.g. 60 Days

Average Stock:

Opening Stock + Closing Stock / 2

2. Debtors Collection Time

Debtors / Credit Sales X 365 = ____ Days e.g. 40 Days

3. Creditors Payment Period

Creditors / Credit Purchases x 365 = ___ Days e.g. 30 Days

C. Gearing Ratios

1. Gearing Ratio

Long Term Loan Capital + Other Fixed Interests (Dividend Bearing Capital) / Long Term Loan Capital + Shareholders Funds X 100 = ___%

D. Shareholder Ratios

1. Earnings Per Share

Net Profit After Tax – Payment On Fixed Interest Bearing Capital / Number Of Ordinary Shares = ____ (p) Pence

2. Price Earnings Ratio

Market Price Per Share / Earnings Per Share = ___%

3. Dividends Per Share

Dividend / Number of Ordinary Shares = ___(p) Pence

4. Dividend Cover

Net Profit After Tax – Payment on Fixed Interest bearing Capital (Or Profit According to Ordinary Shareholders) / Dividends (On Ordinary Shares) = ___ (No of Times)

E. Other Important Formulae

1. Average Rate of Return

Net Return (Profit) Per Annum / Cost X 100 = ___%

2. Net Present Value

Some people prefer to do this one way or another, personally I use the method which involves calculating the present value factor for each year and then adding it to the initial cost. Others may use the following formulae:

Net Present Value: Amount of Money / (1 + Rate of Interest / 100) ^ N (N= Number of Years)

3. Depreciation

Original Cost – Residual Value / Expected Life (Years) = £_____

4. Labour Productivity

Output Per Period / Number of Workers Per Period = £_______ Turnover Per Head

5. Contribution

Selling Price – Variable Cost

6. Break-Even Point

Fixed Costs / Contribution

7. Profit & Loss

Profit = Total Revenue – Total Costs

Profit = Contribution - Fixed costs

8. Total Costs

Total Costs (TC) = Fixed Cost (FC) + Variable Cost (VC)

9. Working Capital

Capital = Current Assets – Current Liabilities

Comments

Originally submitted by Audionut on TSR Forums.