KEY FORMULAE 1

Total Cost = Fixed Cost + Variable Cost.

Contribution p/u = Selling price – Variable cost p/u.

Fixed cost
Break-even point (in units) = -----------------------
Contribution p/u

Margin of safety = Current output – Break-even output.

Total revenue = Output sold x selling price p/u.

Profit = Total revenue – Total cost

OR

Profit = Margin of safety x contribution p/u.

LDR + LRNPV x (HDR – LDR)

IRR = ________________________
(LRNPV – HRNPV)

ARR = Average annual profit x 100%

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Investment

Average investment: Initial investment at start + Amount

Recovered at end
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2

Return on Capital Employed = Profit before Interest and Tax x 100%

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(ROCE) Capital Employed

Capital Employed = Long-Term Liabilities + Capital + Reserves

ROCE = Net Profit Margin x Asset Turnover Ratio

Net Profit Margin = Profit before Interest and Tax x 100%
______________________________
Sales

Asset Turnover Ratio = Sales

_______________
Capital Employed

Gross Profit Margin = Gross Profit

___________ x 100%
Sales

Current Ratio = Current Assets

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Current Liabilities

Quick Ratio (Acid Test) = Current Assets – Stock

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Current Liabilities

Stock Turnover Ratio = Cost of Sales (no. of times)

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Inventory Held

Stock Holding Period = Inventory Held x 365 days (no. of days)

______________________
Cost of Sales

Debtor Collection Period = Trade Debtors x 365 days

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(Debtor Days) Total Credit Sales

Creditor Payment Period = Trade Creditors x 365 days

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(Creditor Days) Total Credit Purchases
Debt to Equity = Long-Term Liabilities
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Capital + Reserves

Debt to Capital Employed = Long-Term Liabilities

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Capital Employed

Interest Cover = Profit before Interest

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Annual Interest Charge

Dividend Cover = Net Profit before Ordinary Dividends

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Ordinary Dividends paid and proposed

Dividend Yield = Dividend per Share x 100%

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Market Price per Share

Earnings per Share = Net Profit Before Ordinary Dividends

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(EPS) Number of Ordinary Shares in Issue

Price Earnings Ratio = Market Price per Share

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(PE Ratio) Earnings per Share