BUSINESS PAPER 2 FORMULAE

Net Cash Flow (NCF)

Cash Inflows - Cash Outflows

Cumulative Cash Flow (CCF)

Current Year NCF + Previous Year CCF

Monthly Cash Flow

NCF in Payback Year / 12

Month of Payback

Amount Outstanding Before Payback / Net cash flow of following year x12

Profit Over Lifetime

Total Net Cash Flows - Initial Investment

Gearing

Non current liabilities / Capital Employed x 100

Average Annual Profit

Profit Over Lifetime / Lifespan

ARR

(Average Annual Profit / Initial Investment) x 100

Present Value

NCF x Discount Factor

Total Present Value (TPV)

Sum of Discounted Cash Flows

Net Present Value (NPV)

TPV - Initial Investment

Expected Value

Probability x Outcome

Net Gain

Expected Value - Cost of Decision

Working Capital

Current Assets - Current Liabilities

Capital Employed

Non-Current Liabilities + Total Equity

Total Equity

Share Capital + Reserves

ROCE

(Operating Profit / Capital Employed) x 100

Labour Productivity

Output per Time Period / Number of Employees

Labour Turnover

(Staff Leaving During Year / Number of Employees) x 100

Labour Retention

(Staff Remaining / Average Number of Staff) x 100

Absenteeism

(Total Absence / Total Working Hours) x 100

Sales Revenue

Price x Quantity Sold

Total Costs

Fixed Costs + Variable Costs

Total Variable Cost (TVC)

Variable Cost per Unit x Output

Contribution per Unit

Selling Price - Variable Cost per Unit

Total Contribution

Contribution per Unit x Quantity Sold

Profit

Sales Revenue - Total Costs

Breakeven Output

Fixed Costs / Contribution per Unit

Margin of Safety (MOS)

Current Output - Breakeven Output

Gross Profit

Revenue - Cost of Sales

Operating Profit

Gross Profit - Operating Expenses

Net Profit Before Tax

Operating Profit - Interest

Net Profit After Tax

Net Profit Before Tax - Tax

Gross Profit Margin (GPM)

(Gross Profit / Revenue) x 100

Operating Profit Margin (OPM)

(Operating Profit / Revenue) x 100

Net Profit Margin (NPM)

(Net Profit After Tax / Revenue) x 100

Current Ratio

Current Assets / Current Liabilities

Acid Test Ratio

(Current Assets - Inventory) / Current Liabilities

Profit Variance

Actual Profit - Budgeted Profit

Actual Profit

Sales Revenue - Total Costs

Budgeted Profit

Budgeted Sales - Budgeted Costs

Capital Productivity

Output / Number of Machines

Labour Cost per Unit

Total Labour Cost / Output

Capacity Utilisation

(Actual Output / Maximum Possible Output) x 100

Net Profit After Tax

Dividends + Retained Profit

Profit

Total Contribution - Fixed Costs

Total Contribution

Sales Revenue - Total Variable Cost