Summary MAC3702 Formula sheets

,Total company risk Degree of operating leverage (DOL) Degree of financial leverage (DFL) Degree of
= Business risk total leverage
Contribution EBIT




DOL




DFL
+ Financial risk
EBIT EBIT - Interest DOL x DFL




Growth/ movement ratios Gross profit margin
Current year - Prior year Gross profit from ordinary activities
Prior year Sales from ordinary activities


Operating profit margin Net profit margin
Operating profit Net profit after tax
Sales from ordinary activities Sales from ordinary activities


Earnings before interest and after tax
Total assets
EBIT x (1 - tax rate)
Total assets

, Operating profits = Profit before investment income


Operating profits
Ordinary shareholder’s earnings Operating assets Net income after short term interest
Ordinary equity Capital employed
Ordinary shareholder’s earnings = Capital employed = Total s/h interest + Long-term funds
Profit after tax OR
- Outside share profit Income from other assets Capital employed = Total equity & liabilities – Current liabilities
- Preference dividend Other assets




return the owners are in fact
receiving when using outside funding Financial leverage effect Leverage ratio
ROE
return owners would receive if ROE - ROA ROA
they contributed all the funds themselves