Finance formulas
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28 Terms
What’s the formula for break-even?
Break-even= Fixed costs/ Contribution per unit
CPU= (selling price-variable costs)
How do you calculate total costs
Total costs= fixed costs+ variable costs
How to calculate profit
Profit= total sales- total costs
How to calculate total sales
Total sales= volume sold x average selling price
How to calculate average revenue
Average revenue= total revenue/ number of sales
How to calculate payback
-add each years net cash flow
-use the year just under the initial investment(amount of years)
-that net cash flow taken from the initial investment
-divide that amount from the net cash flow of the following year
-times that number by 12 to find the amount of months
How to calculate the Average Rate of Return (ARR)
add up all the profits for the year
Minus the initial investment from the total
Divide the new figure by the number of years the project runs for
Divide this figure by the cost of the initial investment
Multiply the result by 100 to get a %
How to calculate the Net Present Value
-Net Cash Flow x Discount Factor
-Add them up - initial investment
-Discount factor= t / (1 + r)t
T=year number
R= discount rate
How do you calculate net cash flow
Net cash flow= total outflows - total inflows
How to calculate Net Current Assets ( working capital)
Net current assets= current assets - current liabilities
How to calculate revenue
Revenue= units sold x unit price
How to calculate retained profit
Profit for the year - dividends
How to calculate gross profit
Gross Profit= total revenue - cost of sales
How to calculate the operating profit
Operating profit= gross profit - expenses
How to calculate profit before tax
Profit before tax= operating profit - finance costs
How to calculate cost of sales (COGS)
Opening inventory + purchases - closing inventory
How to calculate net profit margin
Profit before revenue and tax / revenue x100
How to calculate total assets
Current assets + non current assets
How to calculate gross profit margin
Gross profit / cost of sales x100
How to calculate current ratio
Current assets / current liabilities
How to calculate acid test ratio
Current assets - stock(inventory) / current liabilities
How to calculate the index number
Number in year required/ number in base year x100
How to calculate index change
Value of the year / base year x100
How to use index numbers to work backwards
Base year x (index for year/ base index)
How to calculate index of sales
Price in year/ price in base year x value of the index
How to calculate ROCE (return on capital employed)
Operating profit/ capital employed x100
How to calculate market share
Business sales/ total market sales x100
How to calculate ROE (return on equity)
Profit for the year/ total equity x100