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Business Formulae Sheet

The document provides formulae that will be used for business management external assessment. It lists formulae for: 1) Ratio analysis including profitability ratios like gross profit margin and net profit margin, and liquidity ratios like current and acid test (quick) ratios. 2) Efficiency ratios for return on capital employed (ROCE) and gearing ratio. Additional efficiency ratios for HL include stock turnover and debtor/creditor days ratios. 3) Investment appraisal ratios including average rate of return (ARR) and net present value (NPV). 4) Capacity utilization and productivity rates for HL.

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2K views2 pages

Business Formulae Sheet

The document provides formulae that will be used for business management external assessment. It lists formulae for: 1) Ratio analysis including profitability ratios like gross profit margin and net profit margin, and liquidity ratios like current and acid test (quick) ratios. 2) Efficiency ratios for return on capital employed (ROCE) and gearing ratio. Additional efficiency ratios for HL include stock turnover and debtor/creditor days ratios. 3) Investment appraisal ratios including average rate of return (ARR) and net present value (NPV). 4) Capacity utilization and productivity rates for HL.

Uploaded by

Max
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Appendices

Formulae

The following formulae will be used in business management external assessment. A copy of the formulae
will be provided to students for the examination.

Formulae for ratio analysis (SL/HL)


Profitability ratios (SL/HL)
gross profit
=
Gross profit margin ×100
sales revenue

net profit before interest and tax


=
Net profit margin ×100
sales revenue

Liquidity ratios (SL/HL)


current assets
Current ratio =
current liabilities

current assets − stock


Acid test (quick) ratio =
current liabilities

Efficiency ratios (SL/HL)


net profit before interest and tax
=
Return on capital employed (ROCE) ×100
capital employed

=
where capital employed loan capital (or long-term liabilities) + share capital + retained profit

Efficiency ratios (HL only)


cost of goods sold
Stock turnover (number of times) =
average stock

or

average stock
Stock turnover =
(number of days) × 365
cost of goods sold

where cost of goods sold is an approximation of total credit purchases

opening stock + closing stock


and average stock =
2

Business management guide 87


Formulae

debtors
Debtor days ratio=
(number of days) × 365
total sales revenue

where total sales revenue is an approximation of total credit sales

creditors
Creditor days ratio =
(number of days) × 365
cost of goods sold

where cost of goods sold is an approximation of total credit purchases

loan capital
=
Gearing ratio ×100
capital employed

=
where capital employed loan capital (or long-term liabilities) + share capital + retained profit

Other formulae (SL/HL)


Investment appraisal
SL/HL
=
Average rate of return (ARR)
( total returns − capital cost ) ÷ years of use ×100
capital cost

HL only
=
Net present value (NPV) ∑ present values of return − original cost

Capacity utilization and productivity (HL only)


actual output
=
Capacity utilization rate ×100
productive capacity

total output
=
Productivity rate ×100
total input

88 Business management guide

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