Lecture 1: Accounting Definition
The Accounting Equation ASSETS = CAPITAL + LIABILITIES
Lecture 2: Vertical/Horizontal and Ratio Analysis
Operating Profit
ROCE = × 100
Return on Capital Employed Equity Funds + Non Current Liabilities
ROCE = OM × ATO
Revenue − COGS Gross Profit
Gross Profit Margin (GM) GM = × 100 = × 100
Revenue Revenue
Operating Profit
Operating Profit Margin (OM) OM = × 100
Revenue
Revenue
Net Asset Turnover (ATO) ATO =
Equity + Non Current Liabilities
Closing Inventory
Inventory Holding Period Inventory Holding Period = × 365
COGS
Trade Receivable
Collection Period Collection Period = × 365
Revenue
Trade Payables
Payment Period Payment Period = × 365
Revenue
Current Assets
Current Ratio Current Ratio =
Current Liabilities
Current Assets − Inventory
Acid Test Ratio Acid Test Ratio =
Current Liabilities
Non Current Liabilities + Overdraft + Pereference Shares
Gearing Ratio Gearing Ratio =
Ordinary Share Capital + Retained Earnings
Operating profit
Interest Cover Ratio Interest Cover =
Interest Payable
Lecture 3: Finance and Accounting
Closing Balance Closing Balance = Opening Balance ± Cashflow
Cashflow Cashflow = Receipts − Payments
Lecture 5: Marginal Costing and Short-term decision Making
Contribution Margin Contribution Margin = Sales Revenue − Variable Costs
Operating Profit Operating Profit = Contribution Margin − Fixed Costs
The Accounting Equation ASSETS = CAPITAL + LIABILITIES
Lecture 2: Vertical/Horizontal and Ratio Analysis
Operating Profit
ROCE = × 100
Return on Capital Employed Equity Funds + Non Current Liabilities
ROCE = OM × ATO
Revenue − COGS Gross Profit
Gross Profit Margin (GM) GM = × 100 = × 100
Revenue Revenue
Operating Profit
Operating Profit Margin (OM) OM = × 100
Revenue
Revenue
Net Asset Turnover (ATO) ATO =
Equity + Non Current Liabilities
Closing Inventory
Inventory Holding Period Inventory Holding Period = × 365
COGS
Trade Receivable
Collection Period Collection Period = × 365
Revenue
Trade Payables
Payment Period Payment Period = × 365
Revenue
Current Assets
Current Ratio Current Ratio =
Current Liabilities
Current Assets − Inventory
Acid Test Ratio Acid Test Ratio =
Current Liabilities
Non Current Liabilities + Overdraft + Pereference Shares
Gearing Ratio Gearing Ratio =
Ordinary Share Capital + Retained Earnings
Operating profit
Interest Cover Ratio Interest Cover =
Interest Payable
Lecture 3: Finance and Accounting
Closing Balance Closing Balance = Opening Balance ± Cashflow
Cashflow Cashflow = Receipts − Payments
Lecture 5: Marginal Costing and Short-term decision Making
Contribution Margin Contribution Margin = Sales Revenue − Variable Costs
Operating Profit Operating Profit = Contribution Margin − Fixed Costs
