Accounting formulas

Net cash flow

cash inflow - cash outflow

cumulative cash flow

last year’s cumulative cash flow + this years net cash flow

required number of units to meet a profit target

(fixed costs + target profit)/contribution per unit

margin of safety

expected sales level - break even point

Break even point (units)

fixed costs / contribution per unit

break even point (sales value)

Break even point units x sale price

Variable cost per unit

total variable cost/ nunber of units produced

Overhead absorption rate (OAR)

total overhead cost/ absorption basis

Accounting equation

assets = equity + liabilities

Accounting Rate of Return (ARR)

(average annual operating profit / average investment) x100

Average investment

intial investment into asset + residual value / 2

average annual operating profit

average return - total depreciation

average return

total cash flow / number of years

total depreciation

intial investment - residual value

Profitability index

PV of cash flows / intial investment

profit

revenue - expenses

total cost function

fixed costs + (variable cost per unit x number of units)

profit 2

(number of units x contribution per unit) - fixed costs

cash balance

cash receipts - cash payments

working capital

current assets - current liabilities

marginal costing

sales revenue - variable costs - fixed costs + contribution per unit