Business Formulas

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1. 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
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2. Liquidity: Acid Test

  • Current Assets - Stock ÷ Current Liabilities
  • (Net Profit ÷ Revenue) X 100
  • Sales Revenue ÷ Fixed Assets
  • Current Assets ÷ Current Liabilities

3. Solvency: Gearing Ratio

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

4. Activity: Stock Turnover

  • Sales Revenue ÷ Fixed Assets
  • Cost of Sales ÷ Stock
  • (Debtors ÷ Sales Revenue) X 365
  • Current Assets - Stock ÷ Current Liabilities

5. Profitability: Return on Capital Employed

  • (Operating Profit ÷ Gross Profit - Net profit) X 100
  • (Operating Profit ÷ Creditors after one year + Net Assets Employed) X 100
  • (Operating Profit ÷ Revenue + Creditors after one year) X 100
  • (Net Profit ÷ Revenue) X 100

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