Business management guide 8787
Appendices
Formulae
The following formulae will be used in business management external assessment. A copy of the formulae
will be provided to students for the examination.
Formulae for ratio analysis (SL/HL)
Profitability ratios (SL/HL)
= ×
gross profit
Gross profit margin 100
sales revenue
= ×
net profit before interest and tax
Net profit margin 100
sales revenue
Liquidity ratios (SL/HL)
=current assets
Current ratio current liabilities
−
=current assets stock
Acid test (quick) ratio current liabilities
Efficiency ratios (SL/HL)
= ×
net profit before interest and tax
Return on capital employed (ROCE) 100
capital employed
where loan capital (or long-term liabilities) share capital retained profitcapital employed = ++
Efficiency ratios (HL only)
=cost of goods sold
Stock turnover (number of times) average stock
or
= ×
average stock
Stock turnover (number of days) 365
cost of goods sold
where cost of goods sold is an approximation of total credit purchases
opening stock closing stock
and
2
average stock
+
=
