Business Formulas

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1. Profitability: Return on Equity

  • (Net Profit ÷ Equity Shareholders Funds) X 100
  • (Gross Profit ÷ Equity Shareholders Funds) X 100
  • (Net Profit + Revenue ÷ Equity Shareholders Funds) X 100
  • (Gross Profit - Equity Shareholders Funds ÷ Current Assets) X 100
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2. Solvency: Gearing Ratio

  • (Creditors after one year ÷ Creditors after one year+net assets employed) X 100
  • Current Assets ÷ Current Liabilities
  • (Profit before tax + Interest) ÷ Interest
  • Cost of Sales ÷ Stock

3. Profitability: Gross Profit Margin

  • (Gross Profit ÷ Operating Profit) X 100
  • (Gross Profit ÷ Net Profit) X 100
  • (Gross Profit ÷ Revenue) X 100
  • (Gross Profit + Revenue) X 100

4. Solvency: Interest Cover Ratio

  • (Debtors ÷ Sales Revenue) X 365
  • Sales Revenue ÷ Fixed Assets
  • (Profit before tax + Interest) ÷ Interest
  • Cost of Sales ÷ Stock

5. Activity: Fixed Asset Turnover

  • (Fixed Assets - Stock Turnover) ÷ 365
  • (Sales Revenue ÷ Fixed Assets) X 100
  • Sales Revenue ÷ Fixed Assets
  • (Fixed Assets + Sales Revenue) X 365

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