A2 formulas

total cost of production / number of units produced

number of days of employee absence / total number of workdays

average annual profit / average investment x100
-measures annual profitability of an investment as a percentage of the average investment (average capital cost)
- result is easily understood and easy to compare with other projects but it ignores the timing of the cash flows which could result in two projects having similiar ARR but one could payback much more quickly than the other

liquid assets / current laibilities
(liquidity ratio)
- acid test ratio ignores the least liquid of a firms current assets , its invetories
- measures firms ability to pay back its short term debts

origianl cost of asset - expected residual value / expected useful life of asset (years)

inventory at start of year + inventory at end of year / 2

initial capital cost + residual capital value / 2

non current liabilities + issued shares + reserves

(opening inventrories + pruchases) - closing inventories

current assets / current liabilities
(liquidity ratio)
-measures firms ability to pay back its shrot term debts (eg 2:1 , can pay back its short term debts 2 times over)

profit for the year / annaul dividends
(investment ratio)
- measures how many times dividends could be paid from profit for the year

total annual dividends / total number of issued shares

dividend per share / market share price x100
(investment ratio)
- ratio that measures the annual return from dividends as a percentage of current market share price

profit for the year / number of shares issued

EST (next activity ) - duration - EST (this activity)

non-current liabilities / capital employed x100
(financial efficiency ratio)
- ratio that measures the proportion of capital employed in the business that is financed by long term borrowing ( non-current liabilities)

revenue - cost of sales

gross profit / revenue x100
(profitability ratio)
- how succesful a firm is at turning revenue into gross profit

% change in quantity demand / % change in income

current assets - inventories

sales of the business in time period / total market sales in time period x100

the current statement of financial position value of a non-current asset = original cost less acumilated depreciation

the amount for which existing inventory can be sold - the cost of selling it

1.) multiply net cash flows by discount factors (cash flows in year 0 not discounted)
2.) add the discounted net cash flows
3.) subtract the capital cost of the investment to get the NPV

- consider both timing and size of cash flows in arriving at an apraisal but NPV's can only be comapred with projects that have the same initial capital cost

operating profit / revenue x100
(profitability ratio)
- how good a firm is at converting sales (revenue) into profit from operations

additional net cash flow needed / annual cash flow in a year x12
-the emphasis on speed of return of cash flows gives the benefit of concentrating on the more accurate short term forecasts of the projects profitability but the concentration on the short term may lead business to reject very profitable investments just because they take some time to repay the capital

market share price / earnings per share
(investment ratio)
- the number of years it would take at the current earnings per share to purchase one share at the current makret price
- reflects the confidence investors have in the future prospects of the business

% change in quantity demanded / percent change in price

% change in demand for the product / % change in promotional spending

cost of sales / average inventory
(financial efficiency ratio)
- the number of times in a year that inventory is bought and sold

shareholders equity - share capital

oeprating profit / capital employed x100
(profitability ratio)
- compares operating profit with the capital that has been invested in the business
- the higher the value of the ratio the greater return on capital invested into the business

LFT - duration - EST

selling price x quantity sold

trade payables / credit pruchases x365
(financial efficiency ratio)
- the average time a business takes to pay its suppliers ( the longer this time period is the lower the working capital of the business needs to be

trade receivables / credit sales x365
(financial efficiency ratio)
- measures how long on average it takes a business to recover payment from customers who have bought goods or services on credit (the shorter the better)

current assets - current liabilities