A2 Business Finance Formulas

Current Assets / Current Liabilities

Current Ratio

Liquid Assets / Current Liabilities

Acid-Test Ratio

(Gross Profit / Revenue) x100

Gross Profit Margin

(Operating Profit / Revenue) x100

Operating Profit Margin

(Operating Profit / Capital Employed) x100

Return on Capital Employed (RoCE)

Cost of sales / Average inventory

Rate of Inventory Turnover

(Trade receivables / credit purchases) x365

Day’s Trade Receivables Turnover

(Trade payables / credit purchases) x365

Day’s Trade Payables Turnover

(Non-current liabilities / capital employed ) x 100

Gearing Ratio

Total annual dividends / Total issued shares

Dividend Per Share

Dividend per share / market share price

Dividend Yield Ratio

profit of the year / annual dividends

Dividend cover ratio

Profit of the year / number of issued shares

Earnings Per Share

Market Share Price / Earnings Per Share

Price/Earnings Ratio