Ib Business And Management - Financial

Margin of safety = current output - breakeven output

Breakeven - using the contribution per unit

Breakeven quantity = Fixed costs

Retail - Variable cost per unit

Target profit output = Fixed costs + target profit

contribution per unit

Calculate Target price using output

Output = Fixed costs + target profit

Target price - VC

From the Profit and loss Account

Gross profit = Sales revenue - cost of sales

Cost of sales = opening stock + purchases - closing stock

Net profit before interest and tax = Gross profit - Expenses

From the balanced sheet

Working capital = Total current assets - total current liabilities

Total assets less current liabilities = (fixed assets + current assets) - current liabilities

Net assets = (Total assets less current liabilities) - non current liabilities

Depreciation

Annual depreciation = Original cost - Residual value

expected useful life of asset

Reducing balance method

Net book value in year 1 = Cost of original asset - (Cost of original asset x rate of depreciation%)

Profitability ratios

Gross Proft Margin % = Gross Profit x 100

Sales revenue

Net Profit Margin % = Net Profit before interest and tax x 100

Sales revenue

Efficiency Ratios

Capital employed = Non-current liabilities + share capital + retained profit

ROCE = Net Profit before interest and tax x 100

Capital employed

Liquidity Ratios

Current ratio = Current assets

Current liabilities

Acid test ratio= Current assets - Stock

Current liabilities

Efficiency ratios

Number of times

Stock turnover ratio = Cost of goods sold

Average stock

Number of days

Stock turnover ratio = Average stock x 365

Cost of goods sold

Debtor days = Debtors x 365

Total sales revenue

Creditors days = Creditors x 365

Cost of goods sold

Gearing = Loan capital x 100

Capital employed