Revision

Formulas

• opening equity + capital contribution (or share issuance) + net profit – dividends = closing equity

•opening Inventory + cash purchase of inventory + credit purchase of inventory – cost of sales = closing Inventory

•opening trade receivables + credit sales – collection from customer – bad debt write-off = closing TR

•opening trade payables + credit purchase – payment to supplier = closing trade payables

•opening prepaid expense + cash payment – incurred expense = closing prepaid expense

•opening accrued expense + incurred expense - cash payment = closing accrued expense

Financial Ratios

Gross profit margin = Revenue - Cost of Goods sold

Operating Profit Margin = Operating income / Revenue

Net profit Margin = Net profit / Total Revenue * 100

Return on capital employed = Operating profit / Capital Employed

Return on asset = Net income / Total assets

Return on equity = Net income / Equity

Average inventory days = 365 * (Average inventory / COGS)

Average trade receivables days = 365 * (Average trade receivables / Revenue) or Credit sales

Average trade payables days = Average trade payables / Credit purchases * 365 or Total purchases.

Net asset turnover = sales revenue / Capital employed

Asset turnover = sales revenue / total assets

Capital employed = Total assets - Current Liabilities

Non - Current asset turnover = Sales revenue / total assets

Current Ratio = Current assets / current Liabilities

Acid test ratio = (current assets - inventories) / Current Liabilities

Operating cash cycle = Inventory days + Trade receivable days - Trade payable days