Podcast
Questions and Answers
What is the formula for calculating net cash flow?
What is the formula for calculating net cash flow?
What does the break-even output represent?
What does the break-even output represent?
How is gross profit calculated?
How is gross profit calculated?
What is the formula for calculating the current ratio?
What is the formula for calculating the current ratio?
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What does the profit margin measure?
What does the profit margin measure?
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What is the equation for determining the margin of safety?
What is the equation for determining the margin of safety?
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How is contribution per unit calculated?
How is contribution per unit calculated?
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What does the inventory turnover ratio evaluate?
What does the inventory turnover ratio evaluate?
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Study Notes
Financial Formulas
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Cash Flow Forecasts (E1)
- Net cash flow: Total Cash Inflow − Total Cash Outflow
- Closing balance: Opening Balance + Net Cash Flow
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Break-Even Analysis (E2)
- Total revenue: Selling Price × Quantity Sold
- Total costs: Fixed Costs + Total Variable Costs
- Profit: Total Revenue − Total Costs
- Total contribution: Sales Revenue − Total Variable Costs
- Contribution (per unit): Selling Price − Variable Cost (per unit)
- Profit (using contribution): Contribution per unit × Margin of Safety
- Break-even output: Total Fixed Costs ÷ Unit Contribution
- Margin of Safety: Actual Sales − Break-even Level of Output
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Statement of Comprehensive Income (F1)
- Revenue: Unit Price × Quantity Sold
- Gross profit: Sales Revenue − Cost of Goods Sold
- Cost of goods sold: Opening Inventory + Purchases − Closing Inventory
- Profit/loss for the year: Gross Profit − Expenses + Other Income
- Net book value: Cost − Depreciation
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Statement of Financial Position (F2)
- Net current assets: Current Assets − Current Liabilities
- Net assets: Non-current Assets + Net Current Assets − Long-term Liabilities
- Capital employed: Opening Capital + Profit for the Year − Less Drawings
- Balance sheet equation: Net Assets = Capital Employed
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Measuring Profitability (F3)
- Gross profit margin: (Gross Profit ÷ Revenue) × 100
- Mark-up: (Gross Profit ÷ Cost of Sales) × 100
- Profit margin: (Profit ÷ Revenue) × 100
- Return on capital employed: (Profit ÷ Capital Employed) × 100
-
Measuring Liquidity (F4)
- Current ratio: Current Assets ÷ Current Liabilities
- Liquid capital ratio: (Current Assets − Inventory) ÷ Current Liabilities
- Trade receivable days: (Trade Receivables ÷ Credit Sales) × 365
- Trade payable days: (Trade Payables ÷ Credit Purchases) × 365
-
Measuring Efficiency (F5)
- Inventory turnover: Average Inventory ÷ Cost of Sales × 365
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Description
Test your knowledge on essential financial formulas such as cash flow forecasts, break-even analysis, and the statement of comprehensive income. This quiz is designed to help you understand key financial metrics used in business decision-making. Perfect for students and professionals looking to enhance their financial literacy.
