IB Business Formulas

Payback Period

Initial investment/contribution per month

Accounting rate of return

(Total profit during project/number of years of project)/initial amount invested x100

Net Present Value

Sum of actual value - cost of investments

Working capital

Current Asses- current liabilities

Gross profit

sales revenue - cost of goods sold

COGS (cost of sales)

opening stock +purchases - closing stock

Gross profit

Sales revenue - (opening stock +purchases - closing stock)

Working capital

Current assets - current liabilities

Net assets

fixed assets + working capital

Depreciation Straight line method (no value after)

Purchase cost/lifespan

Depreciation Straight line method (value after)

purchase cost - residual value/lifespan

Reducing Balance Method - Net book value

purchase costs-cumulative depreciation

Gross profit margin

gross profit/sales revenue x100

Net profit margin

net profit (before interest & tax)/sales revenue x100

Current ratio

Current assets (sold in next 12 months)/Current liabilities (paid in next 12 months)

Acid Test Ratio

Current assets-stock/current liabilities

Stock turnover

Cost of goods sold/average stock

Return on Capital Employed

net profit before interest & tax/ capital employed x100

Debtor days

debtor money owed/ sales revenue x365

Creditor days

creditors/cost of sales x 365

Earnings per share

net profit after interest and tax/number of ordinary shares

Dividend yield

Dividends per share/market price of each share x100

Gearing ratio

Long term liabilities / capital employed (value of long term sources of finance) x100

profit

total revenue - total costs

break even point

fixed costs / (price per unit - variable cost per unit)

break even pount ($)

(price per unit x units) OR (fixed cost + (variable cost x units))

total cost

total fixed cost + totcal variable cost