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theme 2 formula (profits (gross profit margin - gross profit / revenue…
theme 2 formula
profits
gross profit margin
- gross profit / revenue x100
operating profit margin
- operating profit / revenue x100
profit for the year (net profit margin)
- net profit / revenue x100
gross profit
- revenue - cost of sales
operating profit
- gross profit - other operating expenses
net profit
- operating profit - interest
break-even
margin of safety
- actual output + break-even output
break-even output
- total fixed costs / contribution per unit
contribution per unit
- price per unit - variable price
total contribution
- total revenue - variable costs | unit contribution x number of items sold
sales forecasting, sales revenue + costs
sales revenue
- price x number of items sold
sales volume
- sales revenue / selling price
total costs
- fixed costs + variable costs
liquidity
current ratio
- current assets / current liabilities (ideal: 1.5:1 + 2:1)
acid test ratio
- current assets (-inventory) / current liabilities (ideal: 0.75:1 + 1:1)
setting budgets
profit budget
- income budget - expenditure budget
variance
- budgeted figure - actual figure (write A or F accordingly)