formulas

• Cash flow forecast


  1. net cash flow = total cash inflows - total cash outflows

  2. closing balance = opening balance + net cash flow

  3. opening balance = closing balance from previous month; or closing balance - net cash flow
• Breakeven analysis


  1. total revenue = selling price × quantity

  2. total costs = fixed costs + variable costs

  3. (net) profit = total revenue - total costs

  4. total contribution = total revenue - variable costs; or contribution per unit × quantity

  5. contribution (per unit) = selling price (per unit) - variable cost (per unit)

  6. profit using contribution = contribution per unit × margin of safety

  7. breakeven output = fixed costs ÷ contribution per unit

  8. margin of safety = sales - breakeven output
• Statement of comprehensive income

  1. gross profit = revenue - cost of sales

  2. cost of sales (goods sold) = opening inventory + purchases - closing inventory

  3. (net) profit/loss = gross profit - expenses + other income
• Statement of financial position

  1. net book value = original (historic) cost - depreciation

  2. net current assets = current assets - current liabilities

  3. net assets = non-current assets + net current assets - non-current liabilities

  4. capital employed = opening capital + profit -drawings; or = net assets
• Gross profit margin


  gross profit ÷ revenue × 100
• Mark up


  gross profit ÷ cost of sales × 100
• (Net) profit margin


  (net) profit ÷ revenue × 100
• Return on capital employed (ROCE)

  profit ÷ capital employed × 100
• Current ratio


  current assets ÷ current liabilities
• Liquid capital (acid test) ratio


  (current assets - inventory) ÷ current liabilities
• Inventory turnover


  average inventory ÷ cost of sales × 365
• Average inventory


  (opening inventory + closing inventory) ÷ 2
• Trade payable days


  trade payables ÷ credit purchases × 365
• Trade receivable days


  trade receivables ÷ credit sales × 365
• Net book value


  The value of an asset after accounting for its depreciation, calculated as the original (historic) cost of the asset minus the total depreciation that has been charged against it.
• Net current assets


  The difference between a company's current assets and its current liabilities, representing the amount of current assets that would be available to pay off current liabilities if the company were to liquidate.
• Capital employed


  The amount of money that has been invested in a business by its owners and lenders, calculated as the sum of a company's opening capital and its profit for the period, minus any drawings, or as the company's net assets.
• Net assets


  The difference between a company's total assets and its total liabilities, representing the amount of the company's assets that would be available to pay off its liabilities if it were to liquidate.